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27. Dezember 2011 
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Investment Strategy Annual 2012: Risk aversion to drive a flight to quality in global real estate investment
With less debt and equity flowing in the major global markets, investors with liquidity of their own will be major beneficiaries in 2012, according to LaSalle Investment Management (“LaSalle”), which today released the 18th edition of its Investment Strategy Annual 2012, a comprehensive survey of, and outlook for, the global real estate markets over the next 12 months.
LaSalle’s strategy team believes that investors in real estate will face stark choices in 2012 at a time when risk aversion will be running nearly as high as in early 2009. Equity and debt will be scarce so financing opportunities will be limited and the tenuous G-7 economic recovery will weaken fundamentals, just as a record amount of real estate debt expires in the US, UK, France, Germany and Japan. As debt expires, LaSalle expects two distinct classes of properties to emerge: those well leased properties in the strongest locations and the largest markets which will still have access to capital and those for which liquidity will be hard to find.
LaSalle’s Investment Strategy Annual 2012 warns that real estate investors should avoid falling into the category of real estate owners who get ‘squeezed’ by debt and equity shortages that are likely to prevail. They should also take advantage of the opportunities that shake loose as de-leveraging accelerates in 2012. The flow of these opportunities is likely to build in those economies where growth rates are most impaired by the current and future macro environment.
LaSalle is warning investors to avoid over-heated emerging real estate markets, where new construction is poorly disciplined, or where capital is flowing too freely. It believes the big investment questions for 2012 are:
• When can investors anticipate stronger fundamentals and rent growth in the developed markets of the G-7?
• Do the growth engines of Asia, Latin America and other emerging markets compensate investors for the risks of developing, owning and operating real estate in these semi-transparent markets?
• Will the European Central Bank, the European Financial Stability Facility (EFSF), and the IMF be able to restore enough confidence in European financial institutions to incite a healthy real estate lending market?
• How will the North American, Asia-Pacific and UK markets be affected by the turmoil in the Eurozone?
Commenting on the report, Jacques Gordon, Global Strategist, LaSalle Investment Management said: “There are three principal investment themes for 2012 – filling capital gaps, growth strategies and core investing and each of these needs to be tailored to the investment opportunities in each country. They also need to be aligned with the overall objectives of each investor’s real estate allocation, alongside stocks, bonds and alternatives.
“Our long-term view is that real estate is now a global asset class, as are stocks, bonds and other forms of private equity. Seeking huge risk premiums in cross-border markets leads to the type of problems that were made painfully evident during the global financial crisis. Compared to last year, we have up-weighted our tilt to both core and value-add investing in North America relative to Europe. Europe will be a trickier market to navigate in 2012 due to concerns about the future of the euro and the likelihood of a European recession.”
Robin Goodchild, International Director, LaSalle Investment Management further commented: “Recent volatility in the markets has revived an intense focus on, and interest in, risk management. It’s LaSalle’s position that it’s prudent to strive for a balanced collection of risk-return combinations during and after periods of great financial stress. As such portfolio managers need to maintain a specific portfolio construction strategy, an investment discipline that compares “required” and “expected” returns, and a willingness to consider high-impact scenarios that might trigger opportunities – or threats.”
LaSalle’s Investment Strategy Annual 2012 outlines three primary investment themes:
1. Capital gap strategies
Investors that can tolerate a modest risk will be able to focus on assets that can be purchased at a steep discount to prime pricing, and then upgraded through carefully structured injections of capital. Filling the gaps in the capital structure of real estate should easily out-perform over the next three to five years if deal selection and execution are handled skillfully. Excellent buying opportunities and mezzanine debt situations will emerge out of the unusual combination of factors:
LaSalle’s strategy team believes that investors in real estate will face stark choices in 2012 at a time when risk aversion will be running nearly as high as in early 2009. Equity and debt will be scarce so financing opportunities will be limited and the tenuous G-7 economic recovery will weaken fundamentals, just as a record amount of real estate debt expires in the US, UK, France, Germany and Japan. As debt expires, LaSalle expects two distinct classes of properties to emerge: those well leased properties in the strongest locations and the largest markets which will still have access to capital and those for which liquidity will be hard to find.
LaSalle’s Investment Strategy Annual 2012 warns that real estate investors should avoid falling into the category of real estate owners who get ‘squeezed’ by debt and equity shortages that are likely to prevail. They should also take advantage of the opportunities that shake loose as de-leveraging accelerates in 2012. The flow of these opportunities is likely to build in those economies where growth rates are most impaired by the current and future macro environment.
LaSalle is warning investors to avoid over-heated emerging real estate markets, where new construction is poorly disciplined, or where capital is flowing too freely. It believes the big investment questions for 2012 are:
• When can investors anticipate stronger fundamentals and rent growth in the developed markets of the G-7?
• Do the growth engines of Asia, Latin America and other emerging markets compensate investors for the risks of developing, owning and operating real estate in these semi-transparent markets?
• Will the European Central Bank, the European Financial Stability Facility (EFSF), and the IMF be able to restore enough confidence in European financial institutions to incite a healthy real estate lending market?
• How will the North American, Asia-Pacific and UK markets be affected by the turmoil in the Eurozone?
Commenting on the report, Jacques Gordon, Global Strategist, LaSalle Investment Management said: “There are three principal investment themes for 2012 – filling capital gaps, growth strategies and core investing and each of these needs to be tailored to the investment opportunities in each country. They also need to be aligned with the overall objectives of each investor’s real estate allocation, alongside stocks, bonds and alternatives.
“Our long-term view is that real estate is now a global asset class, as are stocks, bonds and other forms of private equity. Seeking huge risk premiums in cross-border markets leads to the type of problems that were made painfully evident during the global financial crisis. Compared to last year, we have up-weighted our tilt to both core and value-add investing in North America relative to Europe. Europe will be a trickier market to navigate in 2012 due to concerns about the future of the euro and the likelihood of a European recession.”
Robin Goodchild, International Director, LaSalle Investment Management further commented: “Recent volatility in the markets has revived an intense focus on, and interest in, risk management. It’s LaSalle’s position that it’s prudent to strive for a balanced collection of risk-return combinations during and after periods of great financial stress. As such portfolio managers need to maintain a specific portfolio construction strategy, an investment discipline that compares “required” and “expected” returns, and a willingness to consider high-impact scenarios that might trigger opportunities – or threats.”
LaSalle’s Investment Strategy Annual 2012 outlines three primary investment themes:
1. Capital gap strategies
Investors that can tolerate a modest risk will be able to focus on assets that can be purchased at a steep discount to prime pricing, and then upgraded through carefully structured injections of capital. Filling the gaps in the capital structure of real estate should easily out-perform over the next three to five years if deal selection and execution are handled skillfully. Excellent buying opportunities and mezzanine debt situations will emerge out of the unusual combination of factors:
