2010AWARDS & AnnuAL REVIEW - PERE

Political football
An excerpt from PERE’s uK roundtable in May found participants fearing the
consequences of a hung parliament, which is precisely what happened
Politics was on the minds of the participants in PERE’s UK
Roundtable, which took place in May as the country was set to
go to the polls to vote on the next government.
The common fear was the continuation of a stagnating economy
by a hung parliament, whereby no one party could govern
outright as it lacks an overall majority vote. As things turned
out, their worst fears were confirmed as a collation was formed
between a Conservative party and the Liberal Democrats.
“A hung parliament is what we don’t want,” said Paul White,
managing director of Frogmore Partners. “All we’ll see is another
election within 12 months and, in between that, politicians
will try to score points off of one another. This will be economically
unhelpful to us.”
As the old saying goes, every cloud has a silver lining, and
MGPA’s Alex Jeffrey, who is now chief investment officer of the
firm, already was thinking about opportunities stemming from
a government in need of producing capital receipts to reduce its
debt. “Whoever wins will be downsizing the government’s real
estate footprint, whether it was occupational space or ownership,”
he said. “The SW1 estate (the government’s most prominent
London postal code) will be reduced in size, there will be
decanting of staff and the sale of assets.”
As it happens, in February of this year the government ap-
White, Jeffrey and Hodcroft: playing politics
peared to head down such a path with the appointment of advisers
by the Government Property Unit to help it establish property
vehicles to own and manage up to 65 million square feet of
government offices in London and Bristol.
Such interest in the government wasn’t the result of no viable
assets to buy, rather a lingering bid-ask mismatch. “We have
seen a pipeline of £30 billion a year since 2006,” White said.
“This year, I think we are seeing between £500 million and £600
million of assets a week, so we can’t say we aren’t seeing stock.
We are just not seeing stock at a price we want to pay.”
The resurgence of Germany
in an excerpt from PERE’s German roundtable in november, five professionals discussed
the renaissance of the German economy and the state of its real estate markets
Maybe it is because German
nationals are conservative
by nature or because
they have survived
economic shocks before
or because they are simply
wary of past mistakes,
but local real estate players
were restrained over
the country’s remarkable
economic strength when
PERE caught up with
them in November.
There was plenty of
OpernTurm, Frankfurt: sign of the times reason for cheer as the
German Council of Economic
Experts had just announced that the German economy
was showing 3.7 percent growth in 2010 and was forecasting
2.2 percent growth for 2011. Still, Matthias Hünlein of Tishman
Speyer, Ralf Kind of Barclays Capital, Michael Schleich of
GREAT German Real Estate Advisory Team, Collin Schmitz-
Valckenberg of Orlando Real Estate and Ralph Winter of Corestate
Capital refused to get carried away.
As Hünlein pointed out, part of the cautious German psyche
has to do with a focus on savings and not getting too carried
away by indicators. “Germany has gone through a number of
difficult situations where people had to rebuild wealth,” he noted.
Instead, the participants were focused on a raft of issues from
local investor demand for core assets to the availability of bank
finance to how Germany’s small public real estate sector is ripe
for change. In addition, the current ‘play’ is more about investing
in special situations, where one has to “work like hell”.
Although investors were finding deals that made sense in the
new economic environment, the participants said what would
happen next in Germany was just as likely to be influenced by
global investors as by locals ones. As evidence, they pointed to
the acquisition of the Sony Centre in Berlin by South Korea’s
National Pension Service for around €570 million in May.
Furthermore, just a few weeks after the roundtable was held,
the sale of the OpernTurm in Frankfurt was announced. It was
sold to a joint venture between JP Morgan Asset Management
and the Government of Singapore Investment Corporation.
2010 AwArds & AnnuAl review | PERE 47