Real estate has enjoyed a record year as an asset class. It has drawn institutional and sovereign investors from around the globe into prime markets and, increasingly, into certain secondary markets, as well as into areas such as logistics and infrastructure. Although concerns are being raised in some cities, such as London, about the levels of over-investment in certain market segments, investor appetite shows little sign of diminishing.
The major story for 2015 remains the U.S., which continues to be the major attraction for international investors, with Asia (especially Tokyo and Beijing) and London also being strong draws. This outbound push into prime markets shows no sign of slowing and, with the global growth story still somewhat stymied by slow market growth in other sectors, there is a lot of money still on the sidelines waiting to come into play.
What is the most important trend driving the outlook for the global real estate industry—and how do you see it unfolding in the year ahead?
The lead story for 2015 in global commercial real estate will continue to be the United States. While Europe remains in a deflationary cycle, and Asia treads water, the U.S. remains the clear geographic first choice for global investors seeking long-term steady, safe returns. On a relative basis, despite ever higher pricing in cities such as New York and San Francisco, money will continue to flow into U.S. real estate.
What do you see as the biggest opportunity—or challenge—for Europe’s CMBS market over the next 12 months?
European CMBS issuance has risen in the past few years, reflecting renewed interest in European commercial real estate from a commercial perspective and returns relative to the U.S. However Europe remains fragile from a credit perspective, with uncertainty about the future of the Euro. There are further concerns about sterling as the UK approaches its elections in May. These factors are having a significant bearing on the credit markets in Europe and, in turn, CMBS.
Total value of investment in overseas real estate by Chinese institutional investors in 2014
Source: Knight FrankWhat challenges do Asian investors face in pursuing outbound investments—and how can they overcome them?
Asian investors with global ambitions and in search of yields and diversification are increasingly finding opportunities in developed markets in the United States and Europe. Capital flows from these cross-border players have found their way into numerous asset classes but institutional real estate and other alternative investments remain a key focus. Investors that access valuable local market intelligence and know-how by cooperating with partners and professional advisors can overcome obstacles and profit in cross-border deals.
What is the outlook for the hospitality industry over the next 12 months?
There is continued strong demand for property in the hospitality sector, with investment flows from global investors. The U.S., China, Singapore, and the Middle East are among the biggest capital exporters. Deal volume last year was up 10% on 2013 and is expected to remain strong through 2015 and beyond. At the moment, cross-border deals account for one-third of all transactions but clearly investment patterns are influenced by patterns of business activity and the tourism sector.
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We advised Mapletree Investments Pte Ltd. on its multi-billion-dollar joint venture with Oakwood Worldwide to open more than 100 new properties over the next five years. Mapletree will acquire a 49% stake in Oakwood’s serviced apartment business in Asia, and target acquiring and developing US$4B in corporate and serviced apartments in Asia, Europe, and North America. This is the latest in a series of transactions in which we have represented Mapletree over the years, including the US$1.3B IPO of Mapletree Greater China Commercial Trust in 2013, the largest-ever REIT IPO in Singapore.
We represented salesforce.com, the global leader in customer relationship management, in becoming the anchor tenant of Salesforce Tower, a 1.4 million-square-foot office tower under development in San Francisco that is part of the city’s new Transbay Transit Center. The over 700,000-square-foot lease is believed to be the largest office lease in San Francisco’s history.
We represented Triple Five, a Canada-based retail project developer and owner, in securing a US $1.4B loan to refinance the iconic Mall of America. This transaction was one of the largest single- asset securitizations in 2014.
We continued our longstanding partnership with Starwood Capital, advising the leading investment firm on debt financing transactions and hotel acquisitions valued at more than US$8B in 2014.
Notably, we represented our client in financing the US$1B purchase of TMI Hospitality, Inc., which owns more than 180 limited service hotels across the U.S. We also advised Starwood on the financing of its US$1.4B acquisition of seven malls located throughout the U.S. from Taubman Centers, a real estate investment trust, in two separate, stand-alone securitized financings.
In addition, we helped guide Starwood in financing its acquisition of several portfolios of multifamily properties in a series of deals collectively valued in excess of US$1.3B. We also assisted with the acquisition and financing of a 12-property office portfolio in Southern California for nearly US$300M.
Our London team worked closely with Starwood on a number of high-profile deals in Europe with an aggregate value of more than US$1.4B, including the £200M acquisition of hotel owner and operator De Vere Venues. The complex transaction involved 30 hotels in the UK and required a multidisciplinary approach drawing on our real estate, employment, and commercial teams.
We also advised our client on the acquisition of four extended-stay hotels and an associated residential property in London for more than £200M, as well as the ongoing sale and management-back arrangements in relation to six hotels in Spain in a joint venture with Melia Group.
Additionally, we represented Starwood in acquiring The Roxburghe, one of Edinburgh’s most prestigious hotels. This was reported to be the largest single-asset hospitality transaction in the city since 2007. We also advised on the acquisition of Four Pillars, a portfolio of six hotels in the UK.