EPRA Corporate Access Day
EPRA’s first Corporate Access Day in London in December last year proved to be a big draw. In the wake of the MiFID II implementation, the event met the demands of companies and investors alike by meeting on a neutral industry platform. More than 120 participants, representing 22 listed real estate companies and more than 50 investors, gathered at the Mayfair Hotel in the heart of the West End’s investment community for intensive presentations and networking, which also included market insights from Green Street Advisors and James Seppala, the head of European Real Estate at Blackstone.
“Since our members are directly affected by the MiFID II regulations, EPRA wanted to offer a platform for our members and that is why we decided to organise this Corporate Access Day,” EPRA CEO Dominique Moerenhout commented at the event.
MiFID II is the legislative framework instituted by the European Union to regulate financial markets in the bloc and improve protection for investors after the global financial crisis ten years ago exposed weaknesses in the system. The regulations, which came into force in January last year, place restrictions on inducements paid to investment firms, or financial advisors, by a third party in relation to services provided to clients. Under the legislation, banks are no longer able to charge for research, transaction and corporate access in a single bundle.
“A lot of smaller companies, in particular, are finding it much more difficult to see investors because of the new regulations. It is also more difficult for specialist investors to find smaller companies. Therefore, it is a great idea for EPRA to add value for its members by bringing them both together,” Rolf Buch, EPRA Chairman and CEO of German residential investment company Vonovia, said in a video interview at the Corporate Access event.
Helen Gordon, CEO of UK residential company Grainger, concurred: “I think the Corporate Access Day was a great success. We met some really interesting investors – some current and some new. The breakout sessions with Green Street and Blackstone also enabled us to hear what they think about investing in other sectors and cities in Europe, and to understand how they see global market trends, which was really worthwhile.”
The day began with a breakfast briefing by Cedrik Lachance, Director of REIT Research and Hemant Kotak, Managing Director, Research at Green Street Advisors. The analysts
compared listed market fundamentals on both sides of the Atlantic and concluded that European and UK real estate stocks had the edge on the outlook for investment returns, although this was highly dependent on the individual property sector.
Alternative sectors, particularly UK self-storage, European industrial and German residential, are at the forefront, offering dynamism to the markets compared the traditional office and retail sectors. The Green Street researchers added that US and UK companies appeared to have learned lessons from the experiences of the global financial crisis and have cut leverage, while higher average debt levels on the continent could leave firms exposed during the next downturn.
For the lunch session, James Seppala, Head of Real Estate Europe at Blackstone, the world’s largest property investor, was interviewed by Peter Papadakos from Green Street Advisors. Seppala addressed the issue uppermost in most participants’ minds: “Where do we sit in an ageing European investment market cycle?”
“We are disposing of assets in the private markets and achieving quite attractive valuations, but we also see good investment opportunities in Europe and are quite positive, though we are cognizant of potential geopolitical disruptions. European market fundamentals are generally speaking sound, and we continue to invest actively and remain confident that we are in a reasonable part of the cycle. There is a question over pure ‘bond-like’ real estate given potentially rising interest rates, but added-value investments still present opportunities,” Seppala said.
He added that, as income growth per capita is a main driver of rents, Blackstone focuses on those European cities benefitting from strong long-term fundamentals such as positive urbanisation trends and high-value jobs growth, combined with limited supply. However, Seppala said the European listed sector had not captured quite the same market share as REITs in the US, which he attributed in part to greater structural barriers to shareholder activism in Europe resulting in lower efficiency.
“There is the potential for more action in the public markets in the US because shareholders can hold companies to account. In Europe, the bar is often quite high for these initiatives to become actionable, which can be negative for the company’s investors,” he said.
Dominique Moerenhout concluded that the success of EPRA’s first Corporate Access Day meant the association would press ahead with its plans to replicate the formula in the future: “Our ambition at EPRA is to multiply this type of events going forward, probably by organising two a year starting in 2019. These are likely to take place mainly in London, but we also envisage holding similar events in other European cities.”