April 2018

Property Funds World Awards 2018

PROPERTY FUNDS WORLD AWARDS Special Report Apr 2018 www.propertyfundsworld.com | 2

CONTENTS

Managing Editor: James Williams, james.williams@globalfundmedia.com Managing Editor (Wealth Adviser, etfexpress & AlphaQ): Beverly Chandler, beverly.chandler@globalfundmedia.com; Online News Editor: Mark Kitchen, mark.kitchen@globalfundmedia.com Deputy Online News Editor: Mary Gopalan, mary.gopalan@globalfundmedia.com Graphic Design: Siobhan Brownlow, siobhan.brownlow@globalfundmedia.com Sales Managers: Simon Broch, simon.broch@globalfundmedia.com; Malcolm Dunn, malcolm.dunn@globalfundmedia.com; Sales Manager, Property Funds World: Matthew White, matthew.white@globalfundmedia.com Marketing Administrator: Marion Fullerton, marion.fullerton@globalfundmedia.com Head of Events: Katie Gopal, katie.gopal@globalfundmedia.com Chief Operating Officer: Oliver Bradley, oliver.bradley@globalfundmedia.com Chairman & Publisher: Sunil Gopalan, sunil.gopalan@globalfundmedia.com Photographs: Chris Mikami, www.mikami.co.uk Published by: GFM Ltd, Floor One, Liberation Station, St Helier, Jersey JE2 3AS, Channel Islands Tel: +44 (0)1534 719780 Website: www.globalfundmedia.com

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Publisher

AWARDS 2018

In this issue…03 Property Funds World Awards 2018 results

04 Real estate assets continue to attract institutional demandBy James Williams

07 Caerus Investment ManagementBest Central Europe GP & Best Deal Flow Property Fund Manager

09 AugentiusBest European Depositary & Best Real Estate Fund Administrator Asia

11 Northern TrustBest Real Estate Fund Administrator Europe

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RESULTS

AWARDS 2018 The winners

Best Real Estate Fundraising EuropeAXA Investment Managers – Real Assets

Best Real Estate Fundraising Value AddedEuropean Property Fund IV, BlackRock Real Assets

Best Real Estate Fundraising Debt AXA Investment Managers – Real Assets

Best Overall Performing Property Fund Manager Avignon Capital

Best Real Estate Return for Public Pension FundsAPG Asset Management

Best Specialist Property Fund ManagerRockspring

Best Deal Flow Property Fund ManagerCaerus Investment Management

Best Deal Exits Property Fund ManagerOrion Capital Managers

Best Residential Property Fund ManagerBouwinvest

Best Office Deals Property Fund ManagerKeys Asset Management

Best North American Real Estate Consulting FirmTownsend Group

Best European Mezzanine Fund ManagerDRC Capital

Best European Real Estate Consulting FirmSweco

Best Industrial Deals Property Fund ManagerAXA Investment Managers

Best Hotel Deals Property Fund ManagerAvignon Capital

Best Niche Deals Property Fund ManagerSeaforth Land

Best Sustainable Real Estate Fund ManagerLa Française Forum Securities

Best European DepositaryAugentius

Best Real Estate Sustainability Technology ProviderInflection Point Capital Management

Best Placement Agent EuropeStone Mountain Capital

Best Central Europe GPCaerus Investment Management

Best Cyber Security Service Provider RFA

Best Real Estate Fund Administrator North AmericaVistra

Best Real Estate Fund Administrator EuropeNorthern Trust

Best Real Estate Fund Administrator AsiaAugentius

Best European Real Estate AgentCushman & Wakefield

Best European Real Estate Corporate Finance AdvisorKempen & Co

Best Real Estate Law Firm North AmericaGreenberg Traurig, LLP

Best Real Estate Law Firm EuropeAshurst

Best Real Estate Technology Provider Autodesk

PROPERTY FUNDS WORLD AWARDS Special Report Apr 2018 www.propertyfundsworld.com | 4

Last month, Property Funds World hosted its inaugural awards event at the Reform Club in London. The event proved to be a huge success with a great selection of fund managers including BlackRock, AXA Investment Managers and Avignon Capital, as well as leading asset service providers such as Vistra and Augentius.

It was, in many ways, an important event for Global Fund Media, the platform company within which Property Funds World sits. Given the continued level of institutional investor appetite in the real estate space, and new sub-asset classes like real estate debt gaining traction, the ability to bring leading representatives together, all of whom

had been voted for by their peers, was Global Fund Media’s way of underscoring the commitment it brings to this key area of alternative investing.

We are very proud of all of the 2018 winners, and this will be the first of many more award events we host over the coming years.

Despite fears over higher asset prices, certainly in core markets in the US and Europe, there are no signs that investor inflows are falling. As Preqin noted in their Real Estate Quarterly Update1 in Q3 2017, 38 funds reached a final close, attracting net assets of USD20 billion. This was down on the USD34 billion secured in Q2 by 69 funds,

Real estate assets continue to attract institutional demand

By James Williams

OVERV IEW

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but even though fewer funds are closing than in previous years, Preqin noted that the average fund size is growing; currently USD618 million.

Carlyle Realty Partners VIII, a US-focused opportunistic strategy, was the largest fund to close in Q3 with USD4 billion in AUM, followed by PAG Real Estate’s Secured Capital Real Estate Partners VI, an Asia-focused debt, distressed and opportunistic strategy, with USD1.9 billion in AUM. This compares to USD9.62 billion raised by Blackstone Real Estate Partners Europe V, the biggest fund launch in Q2 last year.

Interestingly, whereas in Q2 20172, Europe-focused funds represented 53 per cent of total capital raised, in Q3, US-focused

funds represented 65 per cent of aggregate capital raised.

This year, in Europe, the French alternative investment group, Ardian, announced that it had raised EUR700 million for its first European real estate fund, after establishing a dedicated commercial real estate investment division in September 2015. And just to further underscore the vibrancy of this asset class, German open-ended real estate funds have now reached a record EUR89.2 billion in AUM.

Open-ended real estate funds are popular with German retail investors. Capital inflows into active funds amounted to almost EUR6.7 billion in 2017. Buoyant interest prompted the launch of four new funds last year generating aggregate inflows of EUR937 million, as fund 10

PROPERTY FUNDS WORLD AWARDS Special Report Apr 2018 www.propertyfundsworld.com | 7

CAERUS INVESTMENT MANAGEMENT

Caerus Investment Management

Best Central Europe GP & Best Deal Flow Property Fund Manager

Caerus Investment Management is a management-owned private equity real estate investment manager established by its two Managing Directors Christopher Millen and Peter Koritschan in 2013, and describes itself as a ‘challenger platform’.

The platform was designed to take advantage of the different business models that exist in terms of commercial real estate fund structuring, from separate account structures to comingled institutional funds, right up to externally managed REITs in due course.

The firm currently has two offices. An administrative head office in London and an asset management arm in Prague, Czech Republic. “The firm’s UK entity is fully regulated by the UK Financial Conduct Authority as an AIFM while Caerus also intends to open a Sydney office in early 2019 to facilitate outbound capital from Australia into Europe and vice versa,” says Millen.

“The Czech entity however, is where we are currently building headcount given our main investment thrust into Central Europe: predominantly the Czech Republic, Poland, Slovakia, with an eye to Hungary.

The ethos of the firm is for Caerus’ management to co-invest into each managed vehicle to ensure proper GP/LP alignment and to properly service each investor according to their special needs and requirements. This is achieved by offering separately managed accounts to provide a tailored investment experience. Caerus’ equity partners and clients include family offices as well as a range of institutional investors wishing to gain exposure to Central Europe.

Each separate account is tailored according to the investor’s origin of their equity, preference for asset class, geography, return profile and liquidity needs.

“We are on track for ending 2018 with EUR700 million in total AUM and remain on the lookout for family offices and institutions for further separate account opportunities. In addition, we are looking for international capital partners and other PERE firms who want a European operating partner,” says Millen.

“We control everything ourselves: from portfolio and asset, down to the base property management level. We are fully vertically integrated.

“We look for core assets at core-plus prices. We’re not opportunistic hunting for distressed assets, we’re not looking to re-develop properties. Rather, we’re looking for properties that have been under-managed or neglected by previous institutional owners and through an intensified asset management approach we clean up those assets, improve tenancy profiles and so on.”

The appeal of Central European real estate is that investment managers get more bang for their buck compared to European prime real estate markets.

Millen says,“There is now much more liquidity in the region, and the quality of buildings is much better than previously. One of the underlying economic drivers is the low labour costs. Countries like Poland have become a big outsourcing market and Prague is the gateway city to Central Europe.”

Millen notes that Caerus’s sweet spot is commercial offices, or offices with a retail component (mixed use commercial).

“We have a very nice acquisition pipeline, which we are looking to execute on with additional capital partners. Leverage in this region is typically 65 per cent. In terms of the gross asset value of the buildings, we generally don’t buy anything below EUR20 million (not institutional) and we try not to go above EUR120 million per object,” confirms Millen. n

Christopher Millen, Managing Director at Caerus Investment Management

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PROPERTY FUNDS WORLD AWARDS Special Report Apr 2018 www.propertyfundsworld.com | 9

AUGENT IUS

AugentiusBest European Depositary &

Best Real Estate Fund Administrator Asia

Since Augentius was established in the UK in 2002, it has enjoyed 20 per cent year-on-year growth, on average, and has expanded its business across the world to become one of the largest global private equity and real estate administrators.

Regulatory developments have certainly played an important role in its growth, with AIFMD in particular prompting PE groups to seek out trusted partners to work with; principally to provide depositary services.

“We’ve seen a continuous demand for our depositary services from US managers and we are now acting for some of the largest US fund management groups,” confirms David Bailey, one of the Founders and Group Head of Marketing. “Amongst these large fund managers they create specific pan-European products as well as US products. That has led to us having a steady growth of depositary work to the extent that the assets we support in this capacity have reached USD35 to USD40 billion.”

While other very reputable specialist PE/RE administrators have focused on European managers, Augentius has trained its sights on both European and US fund managers to whom it acts as Qualified Custodian.

Bailey estimates that Augentius is now one of the largest European depositaries to US funds. “We are actively engaged with the US market. Once you bring one or two big names on board, it creates a snowball effect,” he says.

As Augentius provides standalone depositary services, there are no conflicts of interest. This is advantageous to PE/RE managers who wish to continue to perform in-house administration.

As well as cash monitoring and general oversight, one of the key roles Augentius plays as depositary is asset verification.

This means ensuring assets are properly registered in the name of the fund and that the fund is properly authorised to buy those assets.

In terms of growth opportunities, Asia Pacific is a key market for Augentius. Its PE/RE industry is still relatively young, compared to the US and Europe, but as Bailey points out: “Asia-based managers are becoming more sophisticated and we take care to help guide and assist them. This is important if they wish to market their funds into Europe under AIFMD.

“China is open and we now have Chinese clients. We are making regular visits there. The India market also offers significant opportunities but it takes time. The Indian economy is emerging.”

Augentius opened a Singapore office in 2010 and a Hong Kong office in 2014. Today, APAC represents approximately 25 per cent of Augentius’s global business. Its Asian operational centre is located in the Philippines. Using a follow-the-sun model, European institutions get their cash flow forecasts on their desk for 7am each morning.

“Increasingly, work is being moved around the organisation on a day-to-day basis to speed up processes. We are bringing technology and operational procedures to the Asia Pacific region that other local administrators won’t necessarily have.

“What we bring to the table is industry knowledge and specialisation. We’ve been around a long time, we know what we’re doing and we’ve got the technology in place. Those components added together help us to give Asia clients the highest quality service. We bring a global standard to all of our clients, regardless of where the manager is located,” says Bailey. n

David Bailey, Founder and Group Head of Marketing at Augentius

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returns averaging 2.8 per cent continued to offer outperformance relative to fixed-term deposits or high-quality bonds.

With a good pipeline of capital inflows and fund performance holding up well – closed-ended private real estate funds returned an average of 2.52 per cent per quarter in 2016 – there are plenty of reasons to feel upbeat about real estate investing.

To capitalise on this, asset servicers are busy developing next generation technology tools and solutions to support RE managers. This was evidenced by Northern Trust launching the world’s first commercial application of block chain technology for the private equity market in 2017. The hope is that this technology will have the potential

to be deployed to other asset classes over time, including real estate.

Specifically for its real estate clients, Northern Trust continues to focus on enhancing its global platform, which combines core elements of the Yardi Voyager system with its own ‘in-house’ expertise and systems. For example, it recently introduced a more automated payments process which fully integrates the accounting processes with payment systems whilst retaining robust controls over the entire process.

Northern Trust, like many other global fund administrators and custodians, anticipates continued active interest in the European real estate market in 2018 and the use of REIT structures.

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NORTHERN TRUST

Northern TrustBest Real Estate Fund Administrator Europe

Northern Trust’s real estate fund administration capabilities form an integral part of its global alternatives asset servicing solutions practice. This supports more than USD1 trillion in alternative assets on behalf of asset managers and asset owners.*

As the global surge in real estate investing continues to build, Northern Trust is busy driving new products and capabilities to support a diverse mix of real estate asset manager clients.

“We view ourselves as a strategic operations partner to our clients; providing the operational expertise and infrastructure to enable our clients to focus their time and resources on their strategy and investors,” says Michele Foley, Head of Alternative Investment Services (Ireland), Northern Trust.

The continued global focus on alternative asset investment has propelled inflows from both existing and new clients, helping Northern Trust achieve a 50 per cent increase in global real estate assets under administration over the past 12 months.

Its European centres of excellence in real estate servicing are based in Ireland, Luxembourg, Guernsey and the United Kingdom, all of which are supported by Northern Trust’s global network of offices, providing its clients with the flexibility to grow and evolve their strategies.

Institutional investors are increasingly seeing the benefits of alternative assets as a way of achieving portfolio diversification outside of the current fluctuating global investment markets. Real estate funds in particular, offer a degree of inflation protection and the potential to achieve growth, which is non-correlated to market performance.

Foley explains that Northern Trust has been supporting RE fund launches from managers across the globe, seeking a European hub for their European real estate structures.

“Ireland has been a particular focus for real estate launches from both new

and existing clients. We have noted a recent increase in the use of Real Estate Investment Trusts (REITs) with some funds re-designating their status to this tax-efficient vehicle. REIT structures offer investors a gross dividend (without deduction of tax) so long as the fund continues to comply with certain conditions.

“Structures aside, there is also a general trend to invest in strategies with an environmental and/or a social governance theme, such as alternative energy developments like wind farms or solar energy. This may be held as a direct investment, or in the case of solar energy, held as part of a physical building as an alternative investment stream,” says Foley.

Northern Trust is an active participant in the alternatives industry, contributing to and keeping pace with thought leadership through sponsorship of client forums and participation in leading industry conferences providing thoughtful collaboration, insights and technology development.

Specifically, Northern Trust’s service and product development is focused on helping clients address an increasing array of industry challenges around rising complexity, regulatory pressure and enhanced transparency requirements, especially on data and risk governance.

Northern Trust’s implementation of a pan-European depositary service following the introduction of the Alternative Investment Fund Managers Directive for all alternative asset classes, including real estate, is a good example of this in practice.

“In response to increasing regulatory change we have a dedicated team within our product business whose sole purpose is to support clients with regulatory change – whether this is delivered through new products created to support upcoming requirements or briefings through events, meetings, newsletters and supplementary materials,” confirms Foley. n

*Source: Northern Trust as at 31 December 2017.

Michele Foley, Head of Alternative Investment Services (Ireland) at Northern Trust

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From an investment opportunity perspective, since the Brexit vote Germany has enjoyed a pick-up in interest with EUR13.6 billion of inflows into German real estate in Q3 2016 compared to EUR10 billion for the UK according to Real Capital Analytics. Meanwhile, real estate investment trusts in Germany and Scandinavia have risen since the Brexit vote to trade at premiums to the value of their assets, a sign that investors feel their cash is safer there, found the Emerging Trends in Real Estate Europe 2018 report.

Berlin is the most desirable city, with Frankfurt joint second alongside Copenhagen, followed by Munich and Hamburg. As PwC writes in its Emerging Trends in Real Estate Europe 2018 report3, Frankfurt is starting to see tangible benefits from the UK’s decision to leave the European Union. Brexit uncertainty has led to London residential houses prices falling at their fastest rate in nine years.

One PE manager quoted in PwC’s report said: “The UK has had a growth premium over Europe. That growth premium has gone now.”

Indeed, with European economies like Germany, Spain and Ireland all enjoying good GDP growth, and cities such as Copenhagen enjoying residential investment on the back of strong employment growth, there should be no shortage of commercial

and residential RE investment opportunities over the next 12 months.

Occupier demand drivers in the market are looking strong for the next year, supported by European Central Bank asset purchases and strengthening labour markets, according to a report by Savills Investment Management4. This is supporting take-up activity in the offices sector and is boosting retail sales, while occupier demand for logistics space is expected to remain healthy, thanks to growing e-commerce.

A number of core European property markets are yielding 3.5 to 4.5 per cent and look more attractive than corporate bond markets, which might only offer yields of 1.5 per cent or less. Consequently, investors are looking at the relative pricing of core real estate compared to bonds and are buying it for income reasons.

Which is good news for our award winners, who continue to develop and launch new fund products for the marketplace.

Doubtless 2018 will prove to be another fertile year for fund raising and investing in global real estate. n

Sources:1. http://docs.preqin.com/quarterly/re/Preqin-Quarterly-

Real-Estate-Update-Q3-2017.pdf 2. http://docs.preqin.com/quarterly/re/Preqin-Quarterly-

Real-Estate-Update-Q2-2017.pdf 3. www.pwc.com/gx/en/industries/financial-services/

asset-management/assets/pwc-etre-europe-2018.pdf 4. www.savillsim.com/documents/outlook-2018-report.pdf

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