REAL ESTATE YIELDS: A GLOBAL ANALYSIS

The post-crisis economic landscape has been very kind to real estate, particularly prime property in ‘gateway’ cities. Fiscal and monetary stimulus has produced some economic growth but no self-sustaining momentum has developed. Deleveraging in the OECD has been a headwind, as has crisis in the euro zone. Nevertheless, there has been sufficient economic activity to support rental values in the key property investment markets whilst super-loose monetary policy has driven the ‘search for yield’.

The so called ‘new normal’ of low growth, low inflation and low interest rates is very good for high grade real estate. Quantitative Easing (QE) is designed to boost the value of risky financial assets and feeds directly into activity and remuneration in the large financially orientated cities such as Hong Kong, London and New York. It has other effects as well. Countries in which central banks have expanded their balance sheets aggressively, the US, UK and Japan, have seen the value of their currencies fall. Their property markets, re-priced internationally if not domestically, have attracted strong inward capital flows. Emerging markets have seen hot money inflow which has stimulated the acquisition of local real estate assets due to excess liquidity and overseas real estate assets due to currency appreciation. Finally, even the most defensively minded investors cannot tolerate de minimis returns from cash for long, particularly given the potential link between QE and inflation, so family offices and sovereign wealth funds have been targeting real estate as well.

This report is authored by Grosvenor Group. 

INREV STYLE DEFINITION ANALYSIS IN ASIA PACIFIC - Testing and Validating the INREV Fund Styles Framework for Asian Funds

The first INREV style definition was released in 2004, then revised in 2007, 2009 and lastly in February 2012, when INREV felt the need to provide new definitions to the industry, in order to be able to compare risks and

performance in funds in Europe. The core funds definition (LTV>40%) was partially derived from ANREV feedback on Japan core funds. ANREV adopted the previous style definition in 2012.

In 2012, ANREV first attempted to review INREV style definition when publishing the Investment Intentions Asia Survey which contains a focus to gain insights from respondents on how risk should be assessed in Asia Pacific. Respondents were asked whether they agreed with the new INREV style classification parameters. Generally respondents appeared to consider the INREV style classification as a good start. The majority of respondents from the survey, agreed that the INREV style classification parameters were relevant when assessing fund styles in Asia, with 94% of investors along with 90% of funds managers and 78% of fund of funds managers.

Respondents believed that in order to create global uniformity the above style classification should be adopted. However, only limited investment strategies should be qualified as core. Some respondents specified that the strategy is much more complicated than the simple classification, for example, Japan generally requires higher leverage even at the core level to produce meaningful returns. As Asia GPs lends itself to more value add type exposure and development, perhaps a wider range on that measure are required. The goal of this paper is to test INREV core definition against ANREV core funds in order to provide context to the ANREV decision to adopt the INREV style definition. Therefore ANREV have collected a dataset comprising detailed information for all core funds in December 2013. This snapshot describes the analysis of the data obtained from the ANREV Fund database.

If you have any questions about the release, please contact Amélie Delaunay at [email protected]

As part of its commitment to support its members to improve their sustainability efforts, ANREV is a partner of the Global Real Estate Sustainability Benchmark (GRESB), a global consortium of institutional investors and real estate industry associations committed to assessing the sustainability performance of real estate portfolios.

ANREV Shares GRESB's mission "to enhance and protect shareholder value by evaluating and improving sustainability practices in the global real estate sector."

For the first time this year, GRESB shared with ANREV the sustainability score and answers of ANREV members, whose respondents represent 81% of the non-listed real estate industry respondents in APAC. Isolating the ANREV members' scores provided and opportunity to see how they rank against the industry and generally.