Real Estate Fund Management's Initial Response to COVID-19 - Trusted Insight. Transformational Talent.
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Real Estate Fund Management’s Initial
Response to COVID-19
Max Shepherd
Director, Global Real Estate Practice
April 2020
Trusted Insight.
Transformational Talent.
sheffieldhaworth.com 1
Introduction
In the first quarter of 2020 the Real Estate Investment Management industry has faced
unprecedented challenges. Travel bans and an inability to carry out site visits or host face-to-face
meetings have created major disruption across the industry.
We spent the last week in discussions with 40 key decision makers in European and Global Real Estate
Fund Managers, Investors and Operators, responsible for a combined €700bn AUM and over 3,000
employees. These included:
CEO - €37bn European Real Estate Fund Manager
CEO, EMEA - €78bn Global Real Estate Fund Manager
CIO - €45bn European Real Estate Fund Manager
Head of EMEA Business Development - €67bn Global Real Estate Fund Manager
Global Head of Capital Raising - €160bn Global Real Estate Fund Manager
Portfolio Director - €42bn Sovereign Wealth Fund
The following document summarizes their key insights, concerns, and responses.
sheffieldhaworth.com 2
Industry predictions – Opportunities
Logistics – many leaders remain confident on logistics, caveated with the fact this
may be limited to properties that service e-commerce and FMCG tenants.
Offices - although there has been an immediate impact on new space
requirements, many investors remain committed to the sector. Total office space
may decrease as businesses implement agile working schemes, but this trend
was already underway. Many investors said they had already accounted for this
trend, and they don’t expect to see the radical change to behaviours that some
have predicted. There is also a low development pipeline which has allayed fears
of a return to the market conditions in 2008.
Life sciences - following a pandemic of this scale, many leaders expect the majority
of governments to invest in sciences to manage the aftermath and prepare for
future threats.
Care homes - many investors say they are confident in the strong fundamentals that make it an attractive long-term
prospect.
Residential - investors and fund managers are confident that there will still be strong demand for all types of purpose
built accommodation across Europe.
Debt – we are still seeing new hiring in this space. The majority of leaders we spoke to think there will be increased
demand as investors seek leverage. However, it will be difficult to price deals effectively because unreliable
valuations will make it challenging to underwrite deals. Some think there will be growth in the whole-loan market as
banks pull back.
PERE - leaders of PERE firms said they are already pivoting to more special situations-type deals and expect some
distressed opportunities to come.
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Industry Predictions – Threats
Shared office providers – several leaders think operators will suffer in
the short-term. If large corporations cut significant staff numbers, they
will reduce their short-leased properties first and consolidate staff
back into their long-leased properties.
Hotels – fund management leaders and investors agreed that the
immediate impact will be significant and could be devasting to small
and medium-sized operators. The larger operators are more likely to
be able to ride the storm. Although people’s behaviours may change,
investors said they are confident travel and tourism will come back.
Retail - the majority of investors said this has just accelerated the re-
pricing that was already happening. However, in the short-term, there
will need to be significant distress to be the catalyst for any significant
investment in the sector.
Student accommodation – the high-end student accommodation is typically taken by overseas students. Investors said it is
too early to tell how behaviours are likely to change but in the short to medium-term people may be less interested in
studying abroad. However, the long-term prospects are still strong and one leader thought this could be a good opportunity
to enter the market because they were previously priced out.
Private debt – some leaders think specialist debt funds could be facing a major issue from the pandemic because they are
not set up to refinance problem loans.
Tall buildings – one business leader commented that this experience may change views on risk management and question
whether businesses should all be crammed into one high-rise building or be better to decentralise and split staff between 2-
3 smaller buildings. Business continuity centres may also become redundant because firms were not able to use them in
this crisis and may decide that working from home would be the best course of action going forward.
sheffieldhaworth.com 4
Impact on Working Practices & Capital Raising
Working Practices
75% 80% 95% 60% 70%
Said they have improved their Said the majority of their time Said they had been Said that the fact they
knowledge of technology and Said that communication has has been taken up by investor pleasantly surprised by already have agile working
realised you can be efficient improved reporting and tenant improved productivity in and strong technology has
at home communication some areas been key to a smooth
transition to working remotely
Capital Raising
Implications for existing funds Implications for new funds
Several leaders of Global and European capital raising teams said The majority of leaders said that any new product launches have
that investors are cautious at the moment as they assess any been put on hold.
potential damage to their existing portfolios. Many valuers are Many investors said they are holding off any new allocations until
attaching material uncertainty clauses to their valuations so it may they know where pricing is and what the implications are for their
take time for asset price discovery to come through. current portfolios.
Institutional investors are remaining in queues for open-ended Several leaders of global capital raising predict an increased
funds because the long-term attractiveness versus short-term demand for opportunistic/special situation funds – however, there
potential declines outweighs the prospect of a lengthy wait to get is unlikely to be the same level of distress as the GFC because
back in. there is more liquidity in the market.
Many open-ended funds in the UK have either suspended the Pre-crisis, saw continued growth in demand from
trading in their funds (for both subscriptions and redemptions) or institutional investors for real estate debt funds. Particularly fixed-
are deferring redemptions until such time as the material income investors looking for an uplift from low yielding corporate &
uncertainty around valuations clears. Q2 valuations will be key. government bonds. Investors we spoke to expect this to continue
as they seek more defensive strategies to counter the
unpredictable short-term outlook for equity investments.
sheffieldhaworth.com 5Impact on Recruitment
Candidate Attitudes
Ongoing Searches Not many candidates have yet proactively reached out regarding new roles due to the
impact of the virus. We anticipate this uncertainty and job loss won’t filter into the
Searches that are nearing their executive ranks for some time.
conclusion are moving forward, and Candidates that we have spoken to are keen to find homes that feel stable. Many are
clients are honouring offers that were ideally looking for employers with strong balance sheets, dry powder, and limited legacy
made pre-pandemic. issues.
Searches that are earlier in their In some cases, candidates are more available to speak whilst at home, and we are
process are moving more slowly, in finding that many want to discuss more about their situations and personal issues, as we
general, with interviews being pushed are all seeking connections.
out so that clients can get their arms Some candidates are cautious on large multi-product asset managers where they feel
around the work they are currently the real estate business will be negatively affected by declines in the equities side of the
doing. business.
We have seen new searches started in
debt, marketing and sales. Client Attitudes
Some clients are committing to
carrying out the full process via Some clients are staffing up. These generally include firms that are well capitalized and
remote methods. have dry powder, particularly for distressed / debt investing.
Fresh outreach on searches must be Other clients are putting some potential searches on pause, particularly more junior and
very delicate. It helps to have a prior mid-level roles, where they anticipate that the current team can handle the reduced
relationship with candidates, as workload.
otherwise the conversation may be
either pushed out, ignored, or viewed
of leaders said they will be Of leaders said they have
as somehow slightly inappropriate
opportunistic in hiring and will honoured offers made pre-
timing. continue with critical hires. crisis.
90% 95%
We have seen one search cancelled
for a start-up business.
Many HR leaders said there is more scrutiny right now over any new hiring.
sheffieldhaworth.com 6A Selection of Key People Moves
Below we have selected recent examples of senior people moves in European developers and fund
managers. We have only included publicly available information.
Individual, Month Moved Moving to Moving From
Josip Kardun Meyer Bergman Multi Corporation
April 2020 CIO CEO
John Feeney Mizuho Bank Lloyds Bank
April 2020 MD, Head of European Corporate Finance Head of Real Estate
Charles Robinson Heitman Shenkman Capital
March 2020 MD, Client Service & Marketing, EMEA SVP
Holger Leuth Gateway Real Estate Domicil Real Estate
March 2020 CFO CFO
Jai Patel ICG-Longbow Amro Real Estate Partners
March 2020 Head of Development Finance Founder
Arvi Luoma Blackbrook WP Carey
March 2020 Founder Executive Director, Europe
Gordon DuGan Blackbrook Gramercy Property Trust
March 2020 Founder CEO
Stuart Grant Corelife Investment Stanhope
March 2020 Founder Managing Director
Graham Stanley Corelife Investment Moorfield
March 2020 Chairman & Strategic Advisor Founder
David Benson Workspace Group Whitbread
February 2020 CFO Finance Director
Shuen Chan LGIM Real Assets Sustineri (ESG Advisory Firm)
February 2020 Head of ESG, Real Assets Co-Founder
Remco Van Olst Cromwell Property Group Camelot Europe
February 2020 COO COO
Claire Barber Cadogan Estate British Land
February 2020 Asset Management Director Head of Central London & Meadowhall
sheffieldhaworth.com 7A Selection of Key People Moves cont.
Individual, Month Moved Moving to Moving From
Andrew Heath-Richardson Hudson Advisors Canary Wharf Group
January 2020 MD, Development, Europe Director of Development
Robert Rankin Hudson Advisors ICG
January 2020 MD, Development, Europe MD, Development
Thijs van Dorssen Hines Patron Capital
January 2020 Development Director, Amsterdam Development Director, Europe
Deepa Devani PSP Investments GIC Real Estate
January 2020 Director, Real Estate Investment, Europe VP, UK Investment
Philippe Rouge Baytree Logistics Properties Quartus Logistics
January 2020 Head of France Development Director
Geoffrey Pizzanelli Scannell Propeties AEW
January 2020 Capital Deployment Director, UK & Europe Director, Logistics, Southern Europe
Alberto Gonzalez de las Heras Patrizia Meridia
January 2020 Head of Asset Management, Southwest Europe Head of Asset Management
Panayot Vasilev Mileway Blackstone
January 2020 CFO CFO, European Real Estate
Thorsten Slytå Barings Real Estate M&G Real Estate
January 2020 Managing Director & Head of Scandinavia Director, Nordic Region
Robbert-Jan van Baal Barings Real Estate AXA IM
January 2020 Head of Real Estate Transactions, Benelux Head of Asset Management, Netherlands
Ritesh Ramchandani DTZ Investors Cushman & Wakefield
January 2020 Head of Debt Strategies & Capital Markets Partner, EMEA CRE Debt & Structured Finance
Tim Phillips CA Ventures Lothbury
January 2020 Head of Residential, Europe Director, Residential Fund Management
Paul Kennedy JP Morgan Asset Management ADIA
December 2019 Head of Strategy and Portfolio Manager, Real Head of Private Markets Strategy
Estate Europe
sheffieldhaworth.com 8Contact details
Sheffield Haworth, London Max Shepherd
Director, Real Estate
2nd Floor, 60 Gresham Street
e. m.shepherd@sheffieldhaworth.com
London
EC2V 7BB t. +44 20 7871 0725
enquiries@sheffieldhaworth.com
Jennifer Novack
Co-Head, Real Estate
e. novack@sheffieldhaworth.com
+44 20 7236 2400
t. +1 646 979 2823
www.sheffieldhaworth.com Emily Von Kohorn
Co-Head, Real Estate
e. vonkohorn@sheffieldhaworth.com
www.linkedin.com/company/sheffield-Haworth/ t. +1 646 597 7406
sheffieldhaworth.com 9You can also read
