Industry Magazine

ISSUE 73 APRIL 2021

AROUNDTOWN: ADAPTING TO THE ECONOMIC WINDS KEY Benoit De Page 2

CORONAVIRUS BOOST NOT JUST A Blieck’s 20 FLASH IN THE PAN FOR EUROPEAN LOGISTICS years at Page 8 SMALL APPRAISALS MARKET POSES Befimmo A BIG COMPETITION PROBLEM Page 13 DeA Capital* SWEDEN Hammerson IGD SIIQ Castellum Harworth Group NOVA Real Estate Catena Fastigheter Helical plc Cibus Nordic Real Estate Home REIT* Members list JAPAN Diös Fastigheter HSBC Bank NN Investment Partners Fabege ICAMAP As of March 2021 Hufvudstaden* Impact Healthcare REIT KOREA Kungsleden Inland Homes KAREIT Nyfosa Invesco AUSTRALIA Pandox Janus Henderson Investors Gecina LUXEMBOURG Resolution Capital Icade Platzer* Jefferies Adler Group SA IEIF SBB JLL AUSTRIA Ivanhoé Cambridge Europe Baker & McKenzie Wihlborgs J.P. Morgan CA Immo Klépierre CPI Property Group KPMG IMMOFINANZ Mazars Group Dream Industrial REIT SWITZERLAND Landsec S IMMO Mercialys Grand City Properties Allreal Holding LondonMetric Property B&I Capital BELGIUM MRM MAURITIUS LXI REIT Natixis Brickmark MAS Real Estate Aedifica Grit Real Estate Income Group HIAG Immobilien AG Real Estate Nexity* McKay Securities Paris Realty Fund NETHERLANDS Mobimo Holdings Morgan Stanley Antwerp Management School Orascom Development Ascencio Selectirente ABN AMRO NewRiver REIT Société de la Tour Eiffel Amsterdam School of Real Holding Nottingham Trent University Befimmo Peach Property Group* Care Property Invest Société Foncière Lyonnaise Estate Palace Capital Société Générale APG Asset Management PSP Swiss Property Phoenix Spree Deutschland Cofinimmo SF Urban Property AG* Degroof Petercam Unibail-Rodamco-Westfield a.s.r. real estate Picton Property Income Ltd Executive Master Immobilier/ Université Paris-Dauphine Atrium European Real Estate Swiss Prime Site Premier Asset Management St Louis Brussels VIEWS+S Consulting Bouwinvest University of Geneva Primary Health Properties Home Invest Belgium Brack Capital Properties Züblin Immobilien Principal Global Investors Intervest Offices & GERMANY CB Richard Ellis RDI REIT Warehouses ADLER Real Estate Deloitte Financial Advisory UAE Regional REIT Leasinvest Real Estate Services Abu Dhabi Investment Safestore Allianz Real Estate Authority Montea alstria office REIT EuroCommercial Properties Schroders Qrf City Retail Aroundtown ING Bank Real Estate Finance Aldar Properties Secure Income REIT Retail Estates DEMIRE Kempen & Co UNITED KINGDOM SEGRO Shurgard Self Storage Deutsche EuroShop LaSalle Investment Aberdeen Standard European Shaftesbury Solvay Brussels School Deutsche Industrie REIT Management Logistics* Sirius Real Estate Loyens & Loeff VGP Deutsche Konsum REIT Aberdeen Standard Stenprop WDP Deutsche Wohnen MN Services Investments St. Modwen Properties Xior Student Housing DIC Asset NSI AEW Europe Supermarket REIT DVI Group PGGM AMP Capital Target Healthcare REIT BRITISH VIRGIN FCR Immobilien PPHE Hotel Group Assura The PRS REIT European Property Holdings Hamborner REIT Redevco Europe Services Aviva Investors Town Centre Securities HAWK University Triodos Vastgoedfonds Bank of America Merrill Lynch Triple Point Social Housing Heitman CANADA Vastned Retail Barclays Bank REIT Canada Pension Plan Instone Real Estate Group Wereldhave Tritax Big Box REIT Investment Board IREBS Barclays Capital Yardi BDO Tritax EuroBox REIT LEG Immobilien SE UBS CZECHIA MEAG Munich ERGO NORWAY Big Yellow Group AssetManagement Blackrock Asset Management Unite Group CTP* Entra University of Cambridge PricewaterhouseCoopers Norwegian Property* BMO Global Asset Real Estate Management Management (EMEA) University of Reading, CRER DENMARK Institute Urban & Civic REIT-Adviser POLAND BMO Real Estate Investment Summit Germany GTC BMO Commercial Property Urban Logistics REIT TAG Immobilien Trust Warehouse REIT ESTONIA TLG IMMOBILIEN British Land Workspace Group Baltic Horizon ROMANIA VIB Vermögen NEPI Rockcastle Capital & Counties Properties EfTEN Capital VictoriaPartners CASS Business School USA Vonovia SINGAPORE CBRE Clarion Securities Bloomberg* FINLAND CenterSquare Citycon Cromwell European REIT Citigroup Global Markets GREECE Management Limited Cohen & Steers Capital Investors House National University of Management Kojamo NBG Pangaea REIC Civitas Social Housing Noval Property Singapore CLS Holdings Duff & Phelps KTI Fidelity Management & Ovaro Kiinteistösijoitus SOUTH AFRICA CMS Research HONG KONG Credit Suisse Securities RAKLI University of Hong Kong Growthpoint Properties Global Net Lease* UB Real Asset Management Custodian REIT Neuberger Berman IRELAND SPAIN Derwent London Snow Park Capital Partners FRANCE Hibernia REIT Arima Real Estate Deutsche Alternative Asset Virginia Tech University Management (UK) AXA Real Estate Investment Irish Residential Properties Atom Hoteles W. P. Carey Managers REIT Castellana Properties Deutsche Bank Zell-Lurie RE Center at Argan Yew Grove REIT Gmp Property Ediston Property Investments Wharton BNP Paribas Inmobiliaria Colonial Empiric Student Property Carmila ISRAEL Lar España EY CeGeREAL Amot Investments MERLIN Properties GCP Student * Welcome to our newest Covivio Azrieli Group Neinor Homes* Globalworth members Foncière INEA Spain Financial Centre Goldman Sachs International Foncière Atland ITALY Technical University of Madrid Grainger Frey Aedes SIIQ (UPM) Great Portland Estates Galimmo COIMA RES VBARE Iberian Properties Green Street Advisors

They also play a crucial part in involvement in the public and political Working with and providing retirement security to debate, promotion of best practices millions of people, by offering pension and the cohesion and strengthening for our members funds stable and highly competitive of the industry. assets to invest in. Real estate plays a critical role in Find out more about our activities on all aspects of our everyday lives. www.epra.com Property companies serve businesses EPRA’s mission is to promote, develop and the society by actively developing, and represent the European public real managing, maintaining and improving estate sector. We achieve this through the built environment; where we all the provision of better information live, work, shop and relax. to investors and stakeholders, active ISSUE 73 — APRIL 2021 IN THIS ISSUE

Update from Dominique Moerenhout

It has been over a year since the will be dedicated to macroeconomics Furthermore, I am also pleased to first lockdowns across Europe, and and to the recovery, with a keynote communicate about the recent launch although this year will still not see us speech by Lord King, former of the EPRA Executive Programme for ‘back to normal’, we look at the future Governor of the Bank of England, and listed real estate professionals, with an optimistically. The global rollout of the Wolfgang Münchau, former European inaugural four-half-day course in June vaccines and the stimulus packages commentator for the Financial Times, developed in partnership with INSEAD. prepared by the governments offer an offering a more continental outlook. The live virtual course, “Strategy for insight into a more positive future. The afternoon sessions will focus on Listed Real Estate – What Good Looks While most of the events will have to ESG, health and wellbeing from an Like”, covers the latest trends shaping remain virtual, though hopefully only individual, company, building and city the listed real estate sector, such during the first half of the year, and perspective. Brendan Wallace, Co- as thematic investing, e-commerce face-to-face meetings will probably still Founder and Managing Partner at Fifth and logistics, digitalisation and data be scarce, I am excited to announce that Wall, the largest venture capital firm analytics. Enrolment is ongoing and we are preparing for you a hybrid EPRA focused on proptech, will discuss how our team at [email protected] will Conference in Brussels in September. industry consortia can help propel the be happy to provide you with more After consulting with the membership, real estate forward with technology and information about this initiative. we know that many of you are eager innovation. The remainder of the week Finally, as always, I would like to welcome to go back to meeting in person and will be dedicated to company pitches our newest members: Aberdeen Standard networking with your peers. We have to investors. You will be, of course, also European Logistics, Bloomberg, CTP, secured a venue that will allow us to do welcome to join us online, should you so in a Covid-19 safe way, respecting DeA Capital, Global Net Lease, Home be unable to attend in person. Revised the current strict sanitary measures. REIT, Hufvudstaden, Neinor Homes, sponsorship packages – in line with Nexity, Peach Property Group, Platzer Invitations will be sent very shortly, and the uniqueness of the event – are also and SF Urban Property. • I can already offer you a glimpse into available. For more information, contact the programme. The morning session our team at [email protected].

In this issue Editor & Production Manager Kasia Jasik-Caínzos 2 Aroundtown: Adapting to the 20 European Green economic winds key Deal: Challenges and Article Credits opportunities for the listed Henry Adams 5 Benoit De Blieck’s 20 years sector Jana Bour at Befimmo: From square Samuel Haines metres provider to facilitator 23 Shopping malls post Kasia Jasik-Caínzos of corporate life COVID-19: Proximity and Will King personalised value key Iskren Marinov 8 Coronavirus boost not just a David Moreno flash in the pan for European 24 Zoom in on PropTech Daria Pawelko logistics projects Joanne Solomon 11 Index focus on logistics 25 An insight into Design & Layout accelerating trends ZN Consulting | znconsulting.com 13 Small appraisals market poses a big competition 26 EPRA new members in the Comments & Suggestions problem spotlight [email protected] 15 European office space: 29 Index focus EPRA Temporary or permanent Square de Meeus 23, 1000 Brussels changes? +32 (0)2 739 1010 18 South African REITs position www.epra.com for recovery and long-term @EPRA_realestate PAGE 3 growth AROUNDTOWN: ADAPTING TO THE ECONOMIC WINDS KEY EPRA INDUSTRY MAGAZINE

Adapting to the economic winds the key to Aroundtown’s astonishing success

Hilton Berlin Prime Center Gendarmenmarkt

Consistently travelling against the began, when trying to understand the Gmul Investments (which at that grain of common opinion to take catalysts responsible for Aroundtown’s time had USD 30 billion assets under advantage of the right economic staggering growth since its foundation management (AUM)). They wanted me opportunity appears to have been the 17 years ago. to stay and become a partner in the key to success for Yakir Gabay, the deal, and I stayed as a chairman and “I actually started out as an investment private Israeli billionaire founder of a partner.” German property giant Aroundtown. banker,” says Gabay. “And I learned a And there has been plenty of success. lot about business, generally, doing Not long after, Gabay decided to go M&A and equity and bond issuance.” it alone, using the capital from his Since listing Grand City Properties “When I was an investment banker,” successful M&A deals to fund his own in mid-2012, in which Aroundtown he remarks, “I was doing everything! venture in European real estate. holds a 40% stake, the value of the Finance, technology, property, it didn’t business has increased from an initial matter. What really mattered was THE FIRST ‘MAJOR SHIFT’ EUR 150 million to an impressive that there were opportunities, and we EUR 3.5 billion, a truly spectacular In 2004, Berlin was in a terrible found them wherever they were.” return. Since listing Aroundtown in economical situation. Everyone saw mid-2015, the market cap increased In time, Gabay became head of the the negative, but, Gabay explains, he from EUR 1.6 to 9 billion. largest investment bank in Israel, saw what he calls the first ‘major shift’ and it was here that he learnt the that he was able to capitalise on in the Gabay, who was appointed to the fundamentals of business. “When I city’s real estate. Board of Directors of EPRA in 2020, left the bank to start my own business “Residential and hotel property assets is keen to apportion all the credit venture, I was successful immediately were being sold at ridiculously low for company performance to the as I made a fast profit from M&A, but it expertise and talent of his homegrown prices,” explains Gabay. “This meant PAGE 4 PAGE was really beginners’ luck,” he admits. team. However, it is difficult to look that rental yields were high. Interest past the man who led the company “Later on, I stumbled on a deal where rates in Germany were low, which and his experience outside of the I introduced US investors to buy one made the rental yield spreads even property industry, where his career of the largest asset managers in Israel, more attractive.” ISSUE 73 — APRIL 2021 AROUNDTOWN: ADAPTING TO THE ECONOMIC WINDS KEY

After the GFC, the tables turned, Due to the fallout from the GFC, both however, and many assets needed to countries had an enormous oversupply be converted back in order to maximise of offices. As a result, rents were profitability in a market where demand extremely low, even in comparison to for residential units was high. Eastern Europe, according to Gabay. Then there was a change in the economy While this arrangement shows the – near the time Aroundtown listed on adaptability of the assets themselves, the stock exchange. The economy had Gabay is sure that the agility to convert been growing consistently since 2010, existing assets in this way is rare, if not and high office vacancies began to almost unique, for a business of its decrease steadily. Like its investment size. “The ability to upgrade or convert in Berlin hotels and residential the Aroundtown’s portfolio makeup previous decade, the economic without offloading large numbers of opportunity suggested there was only assets, which comes with considerable one direction of travel. costs, is a phenomenal advantage when trying to maximise shareholder It was a good move. Gabay points out: value,” according to Gabay. That said, he is keen to stress that, “Since then, Germany for the most part, the business is not has had the strongest a developer or a greenfield builder or has not been until very recently. economy in Europe. “We have never been a developer in Unemployment has the classic sense. We don’t buy land been at record lows, and and build,” Gabay says. “But we still have very intensive operations. We so have interest rates. buy partially vacant buildings, make these more efficient and effective The conditions have spaces to fill up, and then use these to been perfect.” generate income. And it has been a very successful business model until now.” The pandemic has thrown a spanner Frankfurt Prime Center Office Interestingly, these operational in the works here, but Gabay is not pessimistic. Instead, he is focusing “And on top of all this, vacancies skills are, Gabay highlights, even on the future of the economy and of were also high. To me, there was only more useful during times of distress the industry. “Things are no longer one direction this could go, and that and economic difficulty, because it clear, so for now, we are on hold,” direction was up.” provides a business with the option to adjust if it wants to, and the means he says. Since the pandemic crisis, And indeed, while the world called to do so if it must. And this, to some Aroundtown’s strategy has been to sell Germany ‘The Sick Man of Europe’, extent, provides some explanation assets above book value and buy back Gabay executed the purchase for the company’s success through shares at a deep discount to net asset opportunity of a lifetime and began difficult economic realities in Germany value (NAV). We sold EUR 2.7 billion of business in real estate. both before, during and after the GFC. mainly non-core assets and did a share buyback of EUR 1 billion at more than a IN-BUILT ADAPTABILITY PART THE SECOND ‘MAJOR SHIFT’ 40% discount to EPRA NAV. OF THE WINNING FORMULA Interestingly, if you look at But, as a man who has made his fortune Not only were the economic conditions Aroundtown’s current portfolio in property finding good economic for purchasing hospitality and compared with the period between opportunities during difficult economic residential assets ripe between 2004 2004 and 2015, the asset split really times, it seems likelier than not that and 2015, aside from a downturn during is like comparing apples with oranges. one will present itself soon. • the Global Financial Crisis (GFC), but Where it began heavily weighted the assets had the added benefit of towards residential and hotels, over interchangeable adaptability. When half of the portfolio is currently in conditions altered slightly to favour, German office assets. YAKIR GABAY for example, residential over hotels, hotels can very easily be physically Gabay explains that “at the beginning Yakir Gabay, developed converted into residential and vice of the company’s history offices were and scaled Aroundtown and Grand City Proper- versa. not the main segment of our portfolio. We started with residential and hotels, ties and led their list- “Strange as it sounds now, before and it was successful for a time, but the ing of on the Frankfurt Stock Exchange. He the GFC, there was a major surplus economic winds changed, and offices continues to help guide of residential in Berlin in particular,” became a phenomenal opportunity. In each firm’s strategy on explains Gabay. “So, we converted 2015 we identified the office segment their Advisory Boards. Mr. the buildings from one to the other in Germany and the Netherlands were Gabay was the CEO of Leumi & PAGE 5 at that time.” undergoing a major shift.” Co Underwriting. Befimmo Executive Committee. From left to right: Aminata Kaké (General Counsel and Secretary General), Benoit De Blieck (CEO), Martine Rorif (COO), Laurent Carlier (CFO). ISSUE 73 — APRIL 2021 BENOIT DE BLIECK’S 20 YEARS AT BEFIMMO

From square metres provider to facilitator of corporate life: How industry heavyweight Benoît De Blieck transformed Befimmo’s business over more than 20 years at the helm

After more than 20 years at the helm of Befimmo, the Belux office REIT, Benoît De Blieck, the long-time CEO has come to the end of his mandate. Yet, this is not the end of the road for the self-professed “workaholic” from Belgium. “Retirement is not a word I want to hear,” says De Blieck firmly. He has no plans for retirement at all just yet. The new CEO, Jean-Philip Vroninks, will be joining Befimmo in the coming months. But even then, De Blieck will sit as a non-executive director on the company board as foreseen until the end of his mandate in April 2022 and has plans to continue working beyond then. “I will be retiring, but I feel young,” he explains. “I am ready to share my experience!” In the meantime, his next role on the board will be to ensure a smooth transition with the new CEO and help the business see through the transformation of the company strategy, which has been ongoing under his leadership since 2016 and is, De Blieck is sure, one of his proudest achievement while at Befimmo. “A few years ago, we were simply a provider of square metres,” De Blieck says. “Now we have become a facilitator of corporate life, of entrepreneurs and the people that work for them. When you think about it, this is actually an enormous change.” CREATE ENVIRONMENTS WHERE PEOPLE CAN WORK, MEET, SHARE AND LIVE Such a change has led to a revamp of the company’s internal and external identity. In this sense, more than any other, says De Blieck, the process has been transformative and, critically, has PAGE 7 The Gateway building taken time. BENOIT DE BLIECK’S 20 YEARS AT BEFIMMO EPRA INDUSTRY MAGAZINE

Silversquare Europe

“We must meet the expectation of overall, offices should be more efficient In order to bring about this change in a our tenants, who require inspiring because there is so much more that can meaningful way, Befimmo is currently spaces,” De Blieck explains. “But this be done in and around them.” developing an app through which it is not as simple as changing a few plans to give control to the users to designs and letting as many square The list of services is extensive: achieve maximum flexibility. “Now on metres as we can.” daycare centres, laundry, fitness their phones, our users will individually centres and cafeterias. And this is only be able to book a desk, a car parking Letting as many square metres as the first step. space, block meeting rooms, order possible may have been the company lunch and so on. This should allow strategy ten years ago, De Blieck “The second step is about building in our buildings to facilitate greater admits, but as the company has grown flexibility,” says De Blieck. According collaboration, growth and innovation.” from just five people to more than 90 to him, Befimmo has found that under his stewardship, so the industry traditional tenants who work on the De Blieck is, however, quick to dispel has moved on with Befimmo at the upper floor offices in their buildings the notion that these types of services forefront of this movement. are heading down to the collaborative will be the sole preserve of the major coworking spaces on the lower floors. “ corporates, instead stating that these Now, the conversation is no longer new solutions will be available for all. “How can we lease more square De Blieck characterises the subtle metres?”. Instead, De Blieck has led shift this will bring about as “open “We have all sorts of tenants, and the company to consider what it really space working rather than open plan these types of services are attractive, means to be a “facilitator of corporate offices.” What this means in practice whoever they are,” explains De Blieck. life”. How does this change the purpose is shifting away from the density of He waves away any notion of cynical of the business? And what does this many current offices where we work intentions or clichés about big banks mean for its talent, its personnel and separately in great numbers and whose workers arrive in the basement its offering? fight over scarce resources, such as gym with a child in arms at 6 AM and available meeting rooms and empty leave only after eating dinner at their For De Blieck, it means increasing creative spaces, and moving towards desks. “This is not about one type of the number of services available and working together smarter. tenant versus the other but the future ensuring the availability of varied use of the workplace.” spaces whenever feasible. Gone will “People will probably now come to be the days of packing colleagues the offices to work together, not And yet, it seemed that the future of into open plan areas and maximising alone,” he predicts. “That will be the the workplace would be completely the number of desks per square difference, and it is about much more transformed at the beginning of metre. Soon, most offices will be than that. We are developing a network last year as working from home was more experience focused, he explains, with Silversquare, the subsidiary we government ordered in countries across Europe and beyond. leading to a demand for quality spaces. acquired in 2017.” But, in what seems like his typically FACILITATE THE WORKING Silversquare is the Belgian pioneer in jovial, affable style, De Blieck coworking, and with them, Befimmo LIFE OF ENTERPRISES, dismisses any concern about the is developing a Belux network ENTREPRENEURS, AND THEIR demise of the office. TEAMS of workspaces to become a one- stop-shop for all different kinds of “To be sincere, I never believed that “Companies have to provide attractive workspace solutions. Ideas include people would never go back to the spaces to hire talent. This means exploring satellite working – a network office,” says De Blieck with a friendly PAGE 8 PAGE improvements in employee welfare of local offices close to where people chuckle. “It’s a question of attachment and the environment, which are both live that serves a different purpose to the company and the need to work integrated into development and to the old-fashioned, enormous and together with people as a team in design. This may mean fewer desks, but singular regional HQ office. order to create value.” ISSUE 73 — APRIL 2021 BENOIT DE BLIECK’S 20 YEARS AT BEFIMMO

And, indeed, there are two major trends that have been accentuated by the pandemic, as far as offices are concerned, says the Belgian. The first is the speed of change but not its direction. Everything we see now was already in planning, but the lockdowns have caused businesses to accelerate changes to remain relevant.

The second accentuation is trust amongst colleagues. Businesses have been forced to continue as before with their employees out of sight, and it seems that productivity has remained stable, and work continues to get done whether people are present in the office or not.

“We looked at our own Belgian figures this morning,” De Blieck highlights, “and the results are not so different from a year ago. People are getting on with the job like they were before, but we hear and see more and more that people miss face-to-face contact with their colleagues!” • Arts 56, Brussels

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Coronavirus boost not just a flash in the pan for the European logistics and distribution real estate sector

“Lummen Carbon free” - Montea’s project of the first carbon-free building for logistical activities in Belgium

Belgium’s Montea, Germany’s VIB lack of land in the most sought-after Logistically, where do businesses keep Vermögen and the UK’s Tritax EuroBox locations” becoming a critical issue this stock with such constrained land look back on an astonishing year for for the industry. On the upside, as land supply in key locations? And what will the logistics and distribution real supply becomes ever tighter, Preston the cost of storage be? For developers, estate sector and consider the recipe predicts that “demand will not be able the issue is competition space, which for future success. to be satisfied by supply, which in turn could present a challenge in the not- will positively drive upwards pressure too-distant future. For occupiers, this One of the most consistent messages on rents.” could represent a significant increase from leaders in the European transport in cost. How does an industry facing logistics sector is that the conditions This has not gone unnoticed and could these challenges remain competitive created during the pandemic are prove extremely attractive for long- and attractive long-term? simply an acceleration or accentuation term investors only now turning to the sector. CBRE’s Q4 European logistics of long-term, pre-pandemic trends WILL THE PARTY CONTINUE? that favour the sector. market summary highlighted that the most constrained markets rental growth By now, it seems a cliché to look Martin Pfandzelter, CEO at VIB was already evident with Belgium up back on the past 12 months and Vermögen, suggests that increased 5.8% year-on-year on average, Italy up recount the disruption caused to demand for space is perhaps the most 1.8% and Germany up 1.4%. communities across the world and the dominant trend that can be seen in businesses that exist to serve them. transport logistics. The reason for this, There is a downside to a restricted Indeed, without comprehensive and he explains, is driven by the rise in supply of land, however. Jo De Wolf, generous stimulus programs, the e-commerce. Pfandzelter is clear that CEO of Montea, notes that through “this effect was further intensified by the pandemic, “we have witnessed disruption could easily have become the coronavirus pandemic” rather than how quickly our economic system is devastation. Yet, where town centre, high street and office real estate PAGE 10 PAGE created by it. disrupted when supply from outside Europe suddenly stops.” As a result, norms have been put on standby, And Pfandzelter is not alone. Nick he expects companies to hold larger a rare star has shone over the Preston, Fund Manager at Tritax stocks and perhaps even bring some distribution and logistics real estate EuroBox, highlights “a fundamental production back to Europe. industry in Europe this past year. ISSUE 73 — APRIL 2021 CORONAVIRUS BOOST NOT JUST A FLASH IN THE PAN FOR EUROPEAN LOGISTICS

According to Preston, it has been “The pandemic has laid bare the need Like De Wolf, Pfandzelter believes VIB suggested that “the pandemic has for a new type of buildings, but it is Vermögen will look to make physical conflated ten years of evolution in not the only driver,” states De Wolf. changes to its assets to help deal with e-commerce into just one year.” But “It is already obvious,” he continues, heightened demand that is forecast to this is not to say that growth and “that the rise of e-commerce will increase in the coming years. Amongst development of the sector will now require additional storage capacity as other measures, he highlights, in stall or even recede. “The pandemic well as new ways to re-organise the particular, the possibility of adding has materially accelerated existing supply chain.” density to its existing sites to make them long-term structural trends,” he future-ready for increased trading. explains. “These are underpinned, in For investors, Preston urges caution part by, urbanisation and advancement amid rising prices, though. “Players in “Performance hasn’t slowed down in in technology.” this space need to avoid being swept 2020,” she says. “We expect this trend up in the wave of demand,” highlights to continue in a comparable manner in De Wolf agrees. The lockdown has Preston. “There is danger here for the current year, 2021. This is because been transformative to e-commerce. anyone who is willing to deploy stable user markets and high demand He describes it as a “breakthrough capital indiscriminately. The sector is for logistics solutions continue to be for e-commerce in Europe” and expected to perform well, but not all behind this development.” It seems predicts that “growth of the sector in locations will perform equally.” unanimous. The distribution and 2020 will be greater than the growth logistics party looks sure to continue. of e-commerce over the last five Fortunately, it seems that the teams years combined!” at Montea and VIB Vermögen are ESG IS EVERYONE’S PRIORITY already alive to this and focus instead But, critically, the heightened level on enhancing current assets to better Density and innovation to spur of activity and interest during meet demand rather than embarking operational profitability is not, the pandemic, which Preston on a Europe-wide spending spree. however, the only thing on the minds has characterised as “explosive”, of investors and operators. ESG is, like has done more than spur some “Focusing on urban and sustainable in many other industries, of great and operational upgrades to help deal delivery will require innovative increasing importance in the transport with future demand. solutions,” says De Wolf. “Given the logistics segment. scarcity of available land, we may well Instead, the knock-on effect has start to see many physical changes to Preston, for example, highlights brought forward growth in overall the sector, like multilayer buildings on increasing evidence of occupiers’ demand for logistics assets. The lack of core locations becoming more common.” preparedness to pay a higher price prime land is a consideration already for high calibre buildings with strong covered by the panel, but the extreme Indeed, Pfandzelter agrees. “We do sustainability credentials. Pfandzelter interest in assets raises a different not expect the coronavirus pandemic sees a similar trend, explaining that it problem entirely. Where there is to have a significant impact on our is no longer just a game of numbers currently a limited supply of prime business strategy,” he explains, and profit. “It has long since ceased to locations for logistics businesses, pointing to the long-term success of be enough to simply build a logistics there is an even greater dearth of the sector outside of the influence of hall in order to achieve the highest state-of-the-art assets. the pandemic. return on investment,” he explains. PAGE 11 VIB Vermögen’s logistics centre in the InterPark in southern Germany CORONAVIRUS BOOST NOT JUST A FLASH IN THE PAN FOR EUROPEAN LOGISTICS EPRA INDUSTRY MAGAZINE

According to Pfandzelter, all individual efforts being made to reduce stakeholders, from the public to banks the environmental impact of the sector. and creditors, now demand a level of Montea is one example of a business MARTIN PFANDZELTER ESG compliance that is growing more looking to make extraordinary strides The VIB Vermögen AG is a me- complex over time. in reducing its own footprint. De Wolf dium-sized company spe- believes the company’s operations can cialising in the manage- However, the complexity of ESG be carbon neutral by the end of 2021. ment of commercial real criteria and the discrepancy with If the business achieves this goal, it estate portfolios, which which they are compiled could quickly will mark a phenomenal effort from has been operating suc- become a problem for the sector. an area of the real estate industry cessfully for more than that many might assume would be 25 years now. The focus De Wolf says that “the time of good unable to compete on environmental is on properties in the lo- intentions is over. The results of sustainability. gistics/light industry and our ESG efforts will be quantified retail sectors in the econom- and judged.” But how? Now, Montea There appears to be a consensus in ically strong Southern German compares itself against its industry the industry that the coronavirus region. VIB’s shares have been listed on the Munich (m:access) and Frankfurt (Open Market) stock ex- peers and is developing criteria around pandemic has simply reinforced what changes since 2005. Mr Pfandzelter has been CEO carbon emissions, energy consumption were already permanent changes of the company since 2017. and sustainable construction practices. in modern consumerism. The trend towards more online shopping will “But the landscape for ESG and continue to consolidate in the future sustainability benchmarking is and is spurring demand from retailers disparate,” explains Preston. Before and e-commerce. In other words, a NICK PRESTON long, he is sure there will be pressure boom year for the sector does not Nick is the fund manager for from multi-country investors to indicate that there is a bust to come. Tritax EuroBox plc with harmonise an approach to ESG At the same time, concerted efforts overall responsibility for reporting and standards. “For now, are being made across the industry to the provision of invest- though, there are many countries in strengthen ESG efforts and transform ment management and Europe languishing behind advanced the distribution and logistics sector advisory services to the markets, such as Germany and the into a positive ESG contributor, company. He has exten- Nordics, who are leading the pack in sive experience at man- no doubt a trend accentuated by aging portfolios of com- this respect.” realisations of the economy’s fragility mercial real estate across at the hands of the pandemic. It is worth noting, however, that the UK and continental Europe. Prior to joining the Tritax Group in September 2017, while there may not be cohesion at And, while nobody wishes to see a he worked for Grosvenor Europe in the positions of the European level of politics on how resurgence of pandemic conditions, Managing Director (Europe) and Head of Portfolio. to define, quantify and judge ESG when it comes to publishing their Prior to this, he held the position of senior director efforts, change could be afoot in results in the coming years, everyone at CBRE Global Investors with responsibility for the Europe with upcoming EU Taxonomy involved in transport logistics sector management of a wide range of portfolios, includ- changes. At the same time, in pockets participants is probably hoping for a ing separate accounts, pooled funds and fund of of the industry, there are monumental little more of the same. • funds portfolios. He joined Tritax Group in 2017 and launched the company in 2018. He was made a part- ner of the Manager, Tritax Group, in 2020.

JO DE WOLF Jo has been the Chief Ex- ecutive Officer of Montea since 2010. Under his management, the port- folio has grown from EUR 200 million to EUR 1.4 billion, and it contin- ues to grow at a pace of EUR 150 million per year. He has been active in European real estate since 1997 and broadened his real estate ex- pertise in various companies of the Belgian listed investment fund Ackermans & van Haaren, the REIT Leasinvest Real Estate and the Extensa Group. He also acted as development manager for the Tour & Taxis reconversion project in Brussels. From 2006 until 2010, Jo headed the Real Estate Department of PAGE 12 PAGE The Brussels Airport Company. He holds a Master’s Degree in Economics (KU Leuven) and a Master’s Degree in Business Administration (Vlerick School).

Tritax EuroBox’ global distribution centre for Mango, at Llica d’Amunt, Barcelona ISSUE 73 — APRIL 2021 INDEX SECTOR FOCUS

Index sector focus

3-year performance: Developed Europe

Industrial Index vs Developed Europe Index FTSE EPRA Nareit Developed Europe Industrial Index

FTSE EPRA Nareit Developed Europe Index 1900

1700

1500

1300

1100

900

700

500

21 FEV 18 FEV OCT 17 DEC 17 SEP 18 SEP NOV 17 JAN 19 JAN OCT 18 DEC 18 JAN 18 JAN APR 18 APR 18 AUG 18 FEV SEP 20 SEP JAN 21 OCT 20 DEC 20 MAR 18 NOV 20 18 JUL FEV 19 FEV 19 SEP OCT 19 DEC 19 MAR 21 19 JUN 18 JUN NOV 19 APR 19 NOV 18 AUG 19 20 JUL FEV 20 FEV MAY 18 JAN 20 JAN MAR 19 20 JUN APR 20 AUG 20 19 JUL MAY 20 MAR 20 MAY 19

DEVELOPED EUROPE INDUSTRIAL LATEST YEAR TO DATE 1 YEAR 3 YEAR (EUR) (MONTHLY, MARCH 2021)

Total Return 8.62% 8.59% 27.19% 22.94%

Premium/Discount to NAV (average) 28.36% 34.50% 33.10% 24.43%

Loan-to-Value (%) 31.15% 31.33% 31.07% 32.51%

Dividend Yield (average) 2.65% 2.58% 2.75% 2.98% PAGE 13 INDEX SECTOR FOCUS EPRA INDUSTRY MAGAZINE

Industrial: EPRA constituent’s assets

Assets owned by EPRA Index constituents*

* FTSE EPRA Nareit Developed Europe Index

STOCK NAME SECTOR SUBSECTOR COUNTRY CODE ENGL MKT CAP

Segro Industrial Rental UK 13 142.69 Tritax Big Box REIT Industrial Rental UK 3 604.33 Warehouses De Pauw Industrial Rental BELG 5 089.57 LondonMetric Property Diversified Rental UK 2 276.80 Catena AB Industrial Rental SWED 1 445.79 Castellum Industrial/Office Mixed Rental SWED 5 271.53 Merlin Properties Socimi Diversified Rental SP 4 084.65 Aroundtown Diversified Non-Rental GER 8 145.64 Montea Industrial Rental BELG 1 402.07 UK Commercial Property REIT Diversified Rental UK 1 101.45 Tritax EuroBox Industrial Rental UK 599.02 Hiag Immobilien Diversified Rental SWIT 811.29 Swiss Prime Site Diversified Rental SWIT 6 057.87 Wihlborgs Fastigheter Diversified Rental SWED 2 506.33 Cofinimmo Diversified Rental BELG 3 366.30 Klovern Industrial/Office Mixed Rental SWED 1 401.18 Kungsleden Industrial/Office Mixed Rental SWED 1 951.91 Intervest Offices & Warehouses Industrial/Office Mixed Rental BELG 541.89 BMO Commercial Property Trust Diversified Rental UK 665.43 Custodian REIT Diversified Rental UK 449.86 Aberdeen Standard European Logistics Income Industrial Rental UK 310.16 Picton Property Income Industrial/Office Mixed Rental UK 558.70 LXI REIT Diversified Rental UK 854.06 Allreal Hld N Diversified Rental SWIT 2 745.15 Standard Life Inv Prop Inc Trust Industrial/Office Mixed Rental UK 292.55 FABEGE Office Rental SWED 3 753.09 RDI REIT Diversified Rental UK 540.70 BMO Real Estate Investments Diversified Rental UK 201.50 NewRiver REIT Retail Rental UK 336.11 Mobimo Diversified Non-Rental SWIT 1 744.60 Wallenstam Diversified Rental SWED 3 362.86 Schroder Real Estate Investment Trust Diversified Rental UK 230.85 PAGE 14 PAGE Regional REIT Office Rental UK 393.52 Leasinvest Real Estate Diversified Rental BELG 442.13 Hibernia REIT Office Rental IRE 742.12 Dios Fastigheter Diversified Rental SWED 938.19 ISSUE 73 — APRIL 2021 SMALL APPRAISALS MARKET POSES A BIG COMPETITION PROBLEM

Small appraisals market poses a big competition problem for Europe’s property equities

Oddly, it is a lack of competition in the thinks they might not want to frustrate real estate appraisal market that poses real estate companies who don’t like to one of the greatest challenges for see much volatility in their results. Vincent Bruyère, Senior Fund Manager at DPAM, speaking in February from a In this sense, Bruyère believes that semi-locked-down Belgium. listed real estate market is always “right”. Prices are competitive, and so The Brussels-based fund manager if there is a discount, it is being taken argues that a lack of appraisal options into account in the buy or sell price outside of the top five or six real of a company’s shares. “Stock values estate consulting businesses allows a will always adapt faster than physical certain “naivety” in direct and private valuation,” he says. “The benefit is that real estate valuations that artificially stocks might provide a buying or selling creates a real disadvantage for listed opportunity today that cannot be taken real estate strategies. advantage of through other methods of real estate investment.” Bruyère, who has invested in listed real estate for institutional clients at What this means in practice, for DPAM for almost 15 years, loves the example, is that retail stock values are asset class. He, along with his senior currently pricing a discount between team colleagues Olivier Hertoghe and approximately 40% and 60%. Bruyère Damien Marichal, oversee no fewer and his team (and the wider market) than ten institutional mandates that expect retail rents and values to be cover liquid real estate equities or, down this year and next, accounting in some cases, combined real estate for the discount. Yet, they do not equities and bond strategies. believe this will be reflected in physical valuations for another two years. The Valuation schedules that smooth returns for big investors holding those returns are key to the appraisal debate, physical assets, or equivalent, will look says Bruyère, particularly among larger steady and smooth when, actually, institutional investors. Where liquid the underlying picture could be one of listed real estate is exposed to real- extreme highs and lows. time price fluctuations on the stock market, the book value of other forms “The markets are not naïve, and this of real estate may only fluctuate once can create opportunities for investors a quarter, or in some cases, only once a in real estate equities,” Bruyère says. year. The underlying value and volatility “But do we need more competition of both forms of real estate could be amongst appraisers? Yes!” the same, but real value fluctuations in unlisted real estate remain hidden Even with complications around much of the time. valuation, Bruyère loves the listed real estate asset class. His interest in real “I personally think we should have estate investment began in physical many, many more appraisers in property during his tenure as Chief Europe that would make independent Financial Officer of Curalia, the Belgian valuations,” says Bruyère. “There is pharmacists’ pension fund. At the time, little competition, and maybe that around 10% of the fund was dedicated explains why, at the moment, we always to direct property, which was further see valuations that are very consistent,” constrained to Belgian real estate, but even when the industry is riding out it was enough to spark a passion for the obvious market fluctuations. asset class that still runs strong today. If there is one criticism of the current Now, Bruyère looks after far greater system in Europe, it is “a lack of sums, yet is constrained only to competition” which allows these naïve liquid listed real estate that is readily

valuations. “Appraisers on the continent available for purchase on the main PAGE 15 Photo copyright: Joshua Fuller are too careful to take the hit,” Bruyère markets because, he stresses, when SMALL APPRAISALS MARKET POSES A BIG COMPETITION PROBLEM EPRA INDUSTRY MAGAZINE

investors want to access their capital, fourth-largest economy in Europe, and three key pillars: Active management, “it is important to be able to look them there are only three or four real estate Sustainability and Research. “We in the eye.” equities available.” put a lot of attention to the ESG side of each company, and we develop The liquidity element of real estate Part of this is a cultural, human issue. our own scorecards to assess the equity investing has been central to “Physical real estate is important to Bruyère’s ethics as a fund manager for people in Europe,” according to Bruyère. quality before engaging with the years, but it is particularly pertinent “For example, in Belgium where I live, management of the companies.” • when considering the relative hype people have an extremely strong surrounding open-ended investment relationship with physical property.” company structures advertising liquid But the bigger issue, Bruyère thinks, is access to property investments in VINCENT BRUYÈRE recent times. the need for a unified REIT regime in Europe to allow for easy, multi-national Vincent Bruyère has more Yet, listed real estate strategies lack diversification within European than 27 years of experience in finance and has been the popularity of direct and open- portfolios. He explains that Europe has a a senior fund manager ended real estate strategies amongst listed universe of about 250 companies in listed real estate at institutional investors in Europe. that we could expect to broaden, deepen Degroof since 2007, af- Bruyère suggests that this is partly and grow under a single European REIT ter which it merged with down to the size of the market. standard. “It is understandable that Petercam Asset Manage- every country in Europe wants to keep ment in 2016. Previously, “At present, one can diversify their its own fiscal regulations, but ideally, all Bruyère was CFO, also man- aging DIRECT real estate for the listed real estate portfolio by market or the REIT regimes should work together pension fund of Curalia. He graduated from Solvay by sector quite well,” he explains. With in Europe.” only a couple of euros, you may have a Brussels School of Economics and Management with an MA in general management after graduating well-diversified exposure in listed real For now, at least, Bruyère is happy with economics and economics and social science estate in different sub-sectors and in with the opportunities the European degrees from the University of Brighton and the different countries. “But there are also real estate equities afford him and University of Namur, Belgium, respectively. Bruyère gaps in what is available. Italy is the his team. DPAM expertise is based on holds a CIAF and RICS.

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PQ_BI_EUROPE-demi-EPRA.indd 1 12/03/2021 11:28 ISSUE 73 — APRIL 2021 EUROPEAN OFFICE SPACE: TEMPORARY OR PERMANENT CHANGES?

European office space: Temporary or permanent changes?

Office is by far one of the most model as the main reference point. and office take-ups downwards, traditional sectors in the Listed Real Therefore, most of the differences forcing several landlords and tenants Estate (LRE) industry. Its history can be among companies are related to the to redesign their corporate strategy tracked for several decades, depending type of tenants, properties’ location, and even to implement new business on the region, even longer than the implementation of new technologies models, being flexible office space, creation of the FTSE EPRA Nareit (FEN) and specific economic drivers. mobility and working from home (WFH) Global Real Estate Index itself. In the last five years, the sector has policies some of the most discussed This is a quite homogeneous sector faced some interesting changes topics. However, some of these trends across the regions, mostly thanks to worldwide. In Europe, all the restrictions are likely to be temporary, while some the introduction of the REIT regimes in associated with the COVID-19 pandemic others seem to bring significant changes several countries using the USA regime have pushed vacancy rates upwards to the industry in the long term.

Trending changes: Working from home and limited mobility

Remote-working or teleworking are professional services, IT and telecom in between 5% and 6% pre-COVID-19 to not new concepts for workplaces; the advanced economies. between 10% and 11% post-COVID-19, COVID-19 pandemic is accelerating and significantly lower across Asia Pacific trends that were already underway In terms of mobility, most European and Greater China where WFH is less for a while, and it is fuelled by WFH countries implemented strict measures common. experience during the pandemic. The (including full lockdown), and most 2 experts and business leaders expect companies adopted WFH policies during Globally, a total of 8.9 million m of an increase in remote working in the lockdown periods. Workplace-related negative absorption is estimated. Of future, therefore possible impacts on mobility was adversely impacted by that, 82% is related to cyclical factors – workplaces. restrictions during the first and second office-using job losses and coworking waves, although a slight increase has impacts – and the remaining 18% related A recent survey by McKinsey indicates been observed with deconfinement to structural factors – an increase in remote that the potential for remote working policies during the summer period. working. The European office sector is is likely to persist in the wake of the forecasted to contract by 5.4 million m2. pandemic, especially among highly- According to Cushman & Wakefield, the With the combined cyclical and structural skilled, highly-educated workers in share of people working permanently impact, that increase in remote working is a handful of industries, occupations from home in the US and Europe is expected to reduce office demand by 0.95 PAGE 17 and geographies, such as finance, estimated to have increased from million m2 during 2020 and 2021. EUROPEAN OFFICE SPACE: TEMPORARY OR PERMANENT CHANGES? EPRA INDUSTRY MAGAZINE

European office demand forecast

Job losses/gains 140 Coworking

120 Permanent WFH Agile WFH 100 Halt to densification 80

Net Absorption Net msf 60

40

20

0

-20

-40

-60 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Source: Cushman & Wakefield (2020), Global Office Impact Study & Recovery Time, Part 1.

New workplace the flexibility to choose; therefore, places, satellite offices and the workplaces will evolve to address headquarters (CBRE, Colliers, JLL). It models and recent the changing needs of a distributed is also expected that some countries/ workforce as a hybrid model to cities/markets, such as London performance redefine workplaces and the role of and Paris, will experience stronger cities and real estate. structural shifts from an increase in remote working than others driven Most of the companies foresee a hybrid Companies will consider providing by higher residential prices, longer workforce split between office, home access to alternative workplaces, commute times, greater congestion and ‘third places’, giving employees including home-offices, coworking and greater adoption of WFH (C&W).

A Hybrid workforce network

NOW FUTURE

SATELLITE HOME PROJECT OFFICE OFFICE NETWORK HEADQUARTERS

HEADQUARTERS AS A NETWORK GYM/CAFE MEETING SATELLITE PROJECT FLEXIBLE ON-DEMAND

PAGE 18 PAGE OFFICE OFFICE SPACE

FLEXIBLE SPACE Source: CBRE Research, Q1 2020. ISSUE 73 — APRIL 2021 EUROPEAN OFFICE SPACE: TEMPORARY OR PERMANENT CHANGES?

There is no doubt that all these this will affect the companies’ profits the same index has accumulated a changes represent a big challenge and value. total return of 15.3%, evidencing the for property companies, analysts and initial overreaction observed in the By the end of February 2021, the FEN investors. The main question remains Europe Office Index accumulated market during the first lockdown, also on how workplaces will transform a total return of -26.9% compared making clear that the sector still has to address a wide adoption of WFH to the precise peak on February 19, intrinsic value and shows interesting policies in the near future and how 2020. However, in the last six months, fundamentals for the future.

FTSE EPRA Nareit Dev. Europe Index: Total Return by sector (19/02/2020 = 1000)

1100

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200 1 FEB 21 8 JAN 21 8 JAN 3 DEC 20 4 OCT 20 13 FEB 21 1 MAY 20 1 MAY 7 APR 20 7 9 OCT 20 25 FEB 21 6 JUN 20 5 AUG 20 AUG 5 10 SEP 20 15 DEC 20 16 OCT 20 21 20 JAN 12 NOV 20 12 NOV 22 SEP 20 27 DEC 20 28 OCT 20 12 JUL 20 2 2 MAR 20 17 AUG 20 AUG 17 18 JUN 20 19 APR 20 19 13 MAY 20 13 MAY 24 JUL 20 19 FEB 20 30 JUN 20 29 AUG 20 AUG 29 25 MAY 20 25 MAY 14 MAR 20 26 MAR 20

Diversified Residential Industrial Helthcare

Self-storage Office Loding/Resorts Retail

Source: EPRA

Right now, there is no clear consensus across the analyst on how permanent these changes will be, where most Bibliography and references companies are rated as ‘neutral’ given the lack of certainty on most of their McKinsey Global Institute (2020). What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and nine countries. main drivers. Colliers (2020). Exploring the post-COVID-19 Workplace What is clear is that the function of the offices will shift away from traditional JLL (2020). COVID-19 Impact: Offices will find a new purpose. formats towards hybrid formats, Cushman&Wakefield (2020). Global Office Impact Study & Recovery Time, Part 1. where ‘flexibility’ and ‘digitalisation’ are key aspects for the future of the EY&ULI (2020). Future of Work. office sector; hence there will be CBRE (2020). The future of the office survey (June, September) plenty of opportunities for all players PAGE 19 in this big game. • SOUTH AFRICAN REITS POSITION FOR RECOVERY AND LONG-TERM GROWTH EPRA INDUSTRY MAGAZINE

South African REITs position for post- COVID-19 recovery and long-term growth

Waterfall City Development

The South African property sector in Some of the objectives include promoting respond swiftly by prioritising the general, and REITs in particular, have South African REITs as an investment protection of their stakeholders’ health been navigating a very challenging class locally and internationally and and safety and ensuring that they period marked by significant socio- support members in addressing core could weather the storm financially. economic headwinds, changes in issues and sector-specific challenges Engagements with regulators, overall fundamentals for the asset collectively. shareholders and other capital class and structural shifts in key providers took centre stage to ensure 2020 was a year of material transition sub-sectors. These trends have all the entire sector value chain’s survival. for SAREIT, which included new been compounded by the onset of leadership appointments and the a pandemic that has fundamentally SAREIT established the Property reshaping as well as the addition Industry Group (PIG) in April 2020 changed the way we work, live and play of critical committees, all of which since the beginning of 2020. together with the South African are a demonstration of the buy- Property Owners Association (SAPOA) Understanding the need to step up in from members to drive the re- and the South African Council of energised strategy. In particular, the support in response to the challenges Shopping Centres (SACSC), assisting pillars of governance, best practice faced by members well before the the industry in navigating the initial methodologies, innovation and best- COVID-19 pandemic, the SA REIT months of the pandemic. PIG proved in-class reporting standards all aim Association (SAREIT), which represents to be an invaluable platform to address to retain and prepare to woo back

PAGE 20 PAGE about 28 members listed on the the unparalleled challenges resulting investors amidst ongoing uncertainty. Johannesburg Stock Exchange (JSE), from the South African government’s deployed the necessary resources to Faced by the unprecedented response to COVID-19. This included become a more prominent voice for the challenges brought about by lockdown an industry-wide assistance and relief industry and deliver on clear objectives. restrictions, South African REITs package for retail tenants hardest hit. ISSUE 73 — APRIL 2021 SOUTH AFRICAN REITS POSITION FOR RECOVERY AND LONG-TERM GROWTH

The initiative expanded beyond tax matters that are significant for the sector at large. As part of meeting retail and focused principally on the sector and will assist SAREIT’s this deliverable, we will be resuming supporting affected SMMEs across members in navigating this difficult our annual conference in May 2021, sectors, with landlords providing period and beyond. acknowledging both the limitations relief and assistance to many other that may still exist with the need for tenants nationally. Consultations with The sector is now looking ahead, regulators relating to pay-out ratios and 2021 has started off on a more industry’s leaders to regain access to associated with JSE listing rules and positive note given the overall market irreplaceable engagement platforms. regulations have also been in the rally since December, major political Key themes already under review spotlight and are expected to continue milestones – including Brexit and the include REITs’ relevance as an asset to ensure that our members can US elections – as well as the roll-out class, ESG considerations and the balance their mandate as REITs with of vaccination programmes that will alignment of investor requirements in the realities facing the sector and our undoubtedly result in a rebound of the current environment. economy, especially with the limited economic activity and have a direct financial support that the government and indirect impact on the South In a society with some of the is able to dispense. African capital markets. deepest inequalities in the world, a A number of other notable milestones SAREIT is committed to delivering the strong real estate sector is a critical were achieved beyond the response right level of support for its members component to support economic to the pandemic. These included by maintaining open and continuous growth, employment and revenues resolutions on several long-standing engagements with government, for the government. Many South matters with the South African regulators and other business African REITs remain mispriced and Revenue Service relating to Value associations with the aim to maintain offer excellent value propositions for Added Tax apportionment and other a conducive business environment for investors while being underpinned by quality assets, skilled and experienced leadership teams and the proven agility and tenacity that has been a hallmark of the SA Inc and its REIT sector. With an increasingly available fintech platform for retail investors, REITs will also continue to be the most accessible, liquid and cost-effective way to own property, thereby making it an undeniably attractive asset class in the long-term for all investors.

With many societies and economies looking to chart a path to recovery amidst ongoing short-term pressures, SAREIT is clear about its role to drive collaboration between members, global peers and other stakeholders to support good governance, international best practices and innovation that will underpin REITs’ continued eminence within the investment community, both in South Africa and internationally. •

JOANNE SOLOMON Joanne Solomon is the CEO of SAREIT. She holds a B Economics degree and is a seasoned marketer with 22 years of experience. Her long track-record stems from working for one of South Africa’s larg- est financial institutions, where she held executive

positions in commercial property PAGE 21 Habaneras Spain finance and corporate and investment banking. EUROPEAN GREEN DEAL EPRA INDUSTRY MAGAZINE

European Green Deal: Challenges and opportunities for the listed real estate sector

By Jana Bour, EPRA EU Policy Manager

With the ‘European Green Deal’ sustainable investments may lead to start of a major ‘Renovation Wave’ (EGD), as with every growth-oriented a transformation of the real estate across Europe, focusing on improving policy strategy, come challenges but sector we see today, including listed the energy efficiency of buildings in also opportunities. The European real estate. line with the principles of the circular Commission aims to reshape our economy. Two additional elements are continent to achieve net-zero The below summarises some of the further increasing the already existing emissions of greenhouse gases by challenges as well as opportunities momentum placed on greening real 2050. It will inevitably require deep for listed property companies and estate investments: social and economic transformation. Real Estate Investment Trusts (REITs), as presented during a recent CAIA 1. Recovery Plan for Europe: The Buildings are responsible for around (Chartered Alternative Investment package put forward by the 40% of energy consumption in Analyst Association)/EPRA webinar on European Union to help with post- Europe. There is a significant annual the European Green Deal. pandemic recovery that has been investment gap estimated at around tied to the climate objectives EUR 177 billion, totalling EUR 1.77 SETTING THE SCENE: trillion between 2021 and 2030, A STRONG HIGH-LEVEL 2. EU Sustainable Finance: An out of which the biggest gap relates POLITICAL AMBITION initiative that was further reinforced to investment in energy efficiency by the EGD aiming to redirect in buildings (74%)i. In this context, EGD has identified the real estate the financial flows into more the Commission’s commitment to sector as an important part of its sustainable economic activities, promoting a shift towards more environmental plan. It proposes the including in real estate

Cumulatively, the European Green taxonomy of sustainable investments blogs, to REITs as an interesting group Deal, the Renovation Wave, the EU and the review of non-financial (ESG) of real estate investors in the context Sustainable Finance and the post- reporting by listed companies. of EGD, saying that REITs are “well- pandemic recovery plan are creating positioned to acquire assets in need of a very strong political movement. We REITS AND LISTED PROPERTY energy retrofit projects and maintain can therefore expect the year 2021 COMPANIES ARE THE ASSET them for the long-term”. to be particularly fruitful in ESG- OWNERS TO WATCH

PAGE 22 PAGE related regulations, laws and policies Even more so in Europe — the continent in Europe. For the listed real estate Christos Angelis, CAIA Director at where EPRA members predominantly sector, the focus will be on the EU Masterdam, points rightly, in one of his invest and where 85% of the building

i Annex to the Communication on The European Green Deal ISSUE 73 — APRIL 2021 EUROPEAN GREEN DEAL

stock was built before 2001 and will industry. It is, therefore, our role to value for the long-term. The sector be standing in 2050ii — the topic of continue explaining, particularly to itself has been focused on retrofit, and renovation, energy efficiency, and EU policymakers, that REITs are in the we see REITs whose entire business sustainability will certainly be high business of investing in the value of models are based on acquiring existing on the agenda of the real estate assets they own and maintaining that assets in need of retrofit.

Well positioned to acquire assets in need of energy retrofit projects:

• Higher liquidity/A2F/Lower transaction costs

• Able to act quickly but with long-term goals & returns

• Able to scale-up energy efficiency investments/large portfolios

REITs’ access to public markets REITS’ POTENTIAL hindering REITs’ ability to invest enables them to gain capital rather OVERLOOKED BY within the European market. quickly to finance retrofits, which are heavy on upfront capital costs. They POLICYMAKERS Currently, only 14 European countries have a REIT regime. And although are equally able to sufficiently scale up Yet, REITs’ ability to help with their investments, including in energy European retrofitting ambitions those 14 countries represent 84% efficiency. They would therefore be the continues to be overlooked by of the European GDP, there are still most logical partner for discussions European policymakers. As the sector major disparities; these are 14 unique with policymakers on how to solve grows, and with it, the number of REIT regimes with no framework current barriers to the continent’s national REIT regimes in Europe, we in place to facilitate their mutual retrofitting efforts. continue to point out the obstacles recognition. iiAs indicated in the EU Renovation Wave strategy published in October 2020

SOLUTION

LITHU- ANIA

LISTED REITs IN THE EUROPEAN UNION

EUROPEAN REITs DIRECTIVE enabling PAGE 23 a mutual recognition EU - REIT REGIMES REIT REGIMES NO REIT REGIMES EUROPEAN GREEN DEAL EPRA INDUSTRY MAGAZINE

also communicate or report on) what underlying economic activities can be considered sustainable. Its ultimate ambition is to drive private capital towards more sustainable activities. Here it is how: 1. The listed property companies, including REITs, will determine if their activities are ‘eligible’ (or, in other words, covered by the EU Taxonomy) and thus can be considered environmentally sustainable. 2. They will then ‘report’ on how and to what extent their activities are eligible. They will do so by informing on the proportion of their turnover, CAPEX and OPEX (where applicable) in their non-financial statements. 3. This information will serve investors who will assess REITs or other property companies and their sustainable investments. However, a successful REIT regime These are the three factors that They would then adjust their own could be an excellent enabling cumulatively impact the decision of investment portfolios accordingly. framework to drive investments in the real estate investors in whether they retrofit of existing buildings. If only a invest in renovation or whether they This is a significant opportunity for the REIT’s status in, for example, Belgium develop or acquire a new building. listed real estate sector to attract new or France would be recognised in investors who are looking to invest in Supporting a new emerging business the other Member States, it would a more sustainable way. The potential model, such as social housing in significantly facilitate their ability to the EU Taxonomy has in supporting listed real estate, could also bring further scale up investments within REITs towards investing in renovations much-needed collaboration between the European internal market. If there is real. However, it can only be governments, property companies, were a European directive enabling materialised provided that: mutual recognition of REITs, subject investors and tenants while addressing to the right set of conditions, it would the top priorities of the Renovation 1. REITs can tap into the renovation certainly help drive the investments Wave, such as energy poverty and category as an economic activity, toward more sustainable real estate. retrofitting the worst-performing and their refurbishment CAPEX buildings in the residential sector. and subsequent rental income are WHAT IS THE BIGGEST considered eligible. CHALLENGE FOR REITS? A lifecycle assessment of the buildings and acceleration of circular economy 2. REITs are incentivised to acquire Ultimately, the biggest challenge could also help improve the way to renovate so that the acquisition for REITs, and any other real estate we look at the value of the existing CAPEX of existing buildings is investor, is to invest in energy buildings. Helping the market see the added on. efficiency retrofit in a: value in existing assets prior to and after renovations is probably one of Recently, the Commission requested 1. Profitable way: It is still an the most important ways policymakers that an expert group from the Platform investment, and there may be could assist the industry. on Sustainable Finance further advise specific constraints with the on how to ensure that the EU Taxonomy rental gaps following the energy POTENTIAL OF THE EU can motivate transitional activities. efficiency investments, particularly TAXONOMY TO DRIVE THIS In other words, the Commission is in the jurisdictions with rent control TRANSFORMATION looking to drive investments not only regulations. in real estate that is already green 2. Impactful way: While ensuring that The EU Taxonomy Regulation that but, more importantly, in real estate the actual performance of the the European Commission adopted that is to become green in order to building has indeed improved as a last year does not obligate companies finance this ‘transition from brown

PAGE 24 PAGE consequence of the investment. to change their business model or to green.’ It is indeed great news for to conduct their business in a more the EGD and its Renovation Wave; 3. Affordable way: Ensuring that after sustainable way. Instead, it sets a however, it remains to be seen to what the investment, real estate remains common framework based on which extent the Commission will incentivise affordable for tenants who pay rent. the sector can determine (and then investment in renovations. • ISSUE 73 — APRIL 2021 SHOPPING MALLS POST COVID-19: PROXIMITY AND PERSONALISED VALUE KEY

stock with online sales (click & collect, (research online, purchase offline). drive-thru services, Zalando Connect) Lockdown has left shoppers asking for Shopping or even deployment of quicker from- more human interaction – shopping store delivery (e.g. QCommerce by malls can offer that. Glovo). malls post Understanding shoppers, what they The economic slowdown also impacted want, how they behave becomes even consumer behaviour. Shoppers tended more critical; therefore, a data-driven Covid-19: to move towards a more targeted, less approach is of paramount importance. frequent, higher basket experiential It means a combination of an effective Proximity shopping (with limited leisure and CRM solution with integrated entertainment elements). omnichannel touchpoints, gathering data about shoppers’ behaviour and and In recent years some shopping malls preferences (e.g. demographic and tested solutions to capture a slice of psychographic characteristics as this online cake well as behavioural and transactional personalised activity records) together with (e.g. click & reserve, aggregated multichannel communication both collection of online purchase with with shoppers and retailers. Shoppers’ value key drive-thru service, live-streaming insights may be effectively enhanced sales), but they find it challenging to with systems analysing people’s compete with multi-brand online stores movement throughout a mall and The Covid-19 pandemic has accelerated due to a limited offer width or technical between stores, such as traditional previous trends in shoppers’ behaviour, capacity. However, end-customer counting, wifi-tracking or the latest as well as crystalised new opportunities proximity remains the great advantage visual recognition tools supported by AI. and challenges for shopping malls. of shopping malls. Analysed data should help define E-commerce sales surged during Clients clearly appreciate this proximity actions improving the experience, the pandemic, and the shift towards (proven by post-lockdown footfall and both digital (e.g. intelligent digital online is expected to grow. Even sales rebounds), and there remains signage, wayfinding, chatbots, non- internet-savvy shoppers learnt a place for shopping malls as long as personalised communication and ads) new technologies stepping out of they continue to adapt and enhance and non-digital (e.g. unique emotional their comfort zones into new sales their focus on shoppers’ experience, experience, personalised events). It channels. The increase in e-commerce personalised value and embrace the can also help landlords streamline stimulated further integration of stores opportunities of the ROPO effect operations, focus marketing strategies and optimise the tenant mix. Post-pandemic decreases in footfall and revenue have meant a stronger focus on costs. Proptech supporting decreases in utility consumption and streamlining facility management, as well as improving collaboration with tenants, which will be highly useful in the near future. Overall, shopping malls now need to embrace technology to drive a digital transformation that has just commenced in earnest for the industry. •

DARIA PAWELKO Daria Pawelko is a Group Innovation Manager at Atrium European Real Estate. She looks for and implements new solutions to improve the shopping experience and operational efficiency in Atrium shopping malls. Earlier, she supported the dig- ital transformation and other strategic initiatives at Empik, the biggest multimedia retail chain in Poland

and advised various industries at Roland Berger, a PAGE 25 strategy consultancy. ZOOM IN ON PROPTECH PROJECTS EPRA INDUSTRY MAGAZINE

Zoom in on PropTech projects

and emotionally through experience, flexibility, sustainability, technology and mobility. MERLIN HUB is served by an innovative Tenant Engagement App that provides users with a wide array of services enriching their working life, available by a simple click. The app functionalities include access control, restaurants booking, special discounts, flex space booking, etc. plus access to a Special Mobility Department offering real-time transport solutions via car-sharing and pooling, shuttle, public network, electric cars, bikes, taxis, Uber, Cabify, etc. with intelligent parking finding for private vehicles). The app is also conceived as a social community, sharing weekly events, activities and newsletters. Some 30,000 clients of the company Covivio’s Symbiosis project in southern Milan have access to this service at MERLIN As one of the leading property HUB, with more than 2,000 subscribers Covivio: Smart building company in Europe, Covivio is moving since launching. forward testing and adopting new and innovation In addition, all buildings are being technologies in order to improve the fitted with a centralised predictive Coronavirus is amplifying demand for way we serve our clients. more flexible commercial real estate. maintenance system as part of the In this context, technology allows company´s ambitious 2017-2022 us to do more with less. At Covivio, MERLIN Properties plan on sustainability, which has so we rely on data to improve the ways far resulted in the certification of we manage our own assets. Several launches ‘Merlin Hub’ more than 80% of all MERLIN office IoT (internet of things) initiatives Madrid Norte buildings to LEED (Silver, Gold or have been taken both for monitoring Platinum) and BREEAM (Good, Very buildings consumptions as well as The largest connected Business Hub in Good or Excellent) standards, with improving indoor air quality. Europe with more than 327,000 m2 of a pioneering agreement in Europe interlinked office space; 33 buildings to adopt the US Wired Score (high On the first topic, a real-time are connected physically, digitally connectivity) certifications. platform has been set-up to collect environmental and energy consumption data from buildings. Such an IoT infrastructure has been deployed in 20 different assets – residential, offices and hotels – in France, Italy and Germany. The overall architecture of the system is built upon multiple types of censors located in buildings technical infrastructures (HVAC systems), which communicate with a cloud infrastructure. Regarding air quality, following a European’s initiative (Air Quality Challenge) launched in partnerships with EDF, another IoT infrastructure

PAGE 26 PAGE is about to be deployed in France and Italy, aiming to monitor carbon dioxide (CO²) and volatile organic compound (VOC) levels in offices’ private and public areas. ISSUE 73 — APRIL 2021 AN INSIGHT INTO ACCELERATING TRENDS

An insight into accelerating trends

At the start of the year, EPRA held Take the example of the office market; the COVID-19 crisis accelerated the its flagship Insight events in a virtual research shows that 85% of the global penetration of e-commerce by four to format across four markets: London, population wants to work from home five years, with the volume of packages Brussels, Paris and for the first time not more than one or two days per growing by 75% between 2017 and 2021 Germany. Industry leaders discussed week. “Humans are social beings. and expected to grow by another 75% the market outlook for 2021, with And working alone is not necessarily by 2025. New platforms, like Instagram, the big debate being about how the the same as working from home,” have become the main e-commerce pandemic will impact the real estate participants heard. drivers, but physical stores are still very sector at large going forward. much needed, with outlets, destination- The focus, however, has shifted: the led retail and community-based retail 2021 was deemed to be a year of main question now is how to create a leading the way. further uncertainty and transition, working environment where people with the global rollout of the vaccines, want to be. It is not anymore about On the back of the success of the massive EU stimulus package and ECB open landscape architecture and logistics sector appeared a new purchasing programme, as well as the accommodating more people into less distribution challenge linked to end of negotiations around Brexit. square meters; the future of the office ordering food online. Panellists in Whilst the EPRA-commissioned Oxford sector will be much more employee- Brussels wondered if we would see this Economics report foresees a return to driven. trend continue to accelerate and if this pre-crisis level at some point in 2022, could be a starting point for a new sub- A shift of focus on people did not only speakers across all markets shared an asset class in logistics. optimistic view about the resilience of happen in the office sector. Panellists the European listed real estate sector. agree that residential, student Overall, while 2020 has been a tough housing and retail sectors have seen year for our sector, the listed real From working from home to a refocusing of the conversation estate sector has shown tremendous e-commerce, passing by digitalisation, around customer relationship. Deeper solidarity and generosity in supporting none of these concepts are new. There strategic customer relationships, its tenants and local communities and is a broad consensus that these trends with an emphasis on innovation and plans to continue doing so in 2021 were in part already anticipated, and technology, is what is believed to drive and beyond. Everyone is expecting to what the pandemic did was massively success in the long-term. see a real estate sector more flexible, accelerate them. And while some sectors connected and resilient emerge from feel the pressure more than others, and While the logistics sector is currently in this crisis. • some markets may never return to pre- what one can call a ‘perfect storm’, with Covid-19 levels, the general feeling is online sales at the heart of the growth, that a sustainable level will be recovered self-storage is still underdeveloped in PAGE 27 sooner rather than later. Europe. According to Bank of America, EPRA NEW MEMBERS IN THE SPOTLIGHT EPRA INDUSTRY MAGAZINE

EPRA new members in the spotlight PAGE 28 PAGE ISSUE 73 — APRIL 2021 EPRA NEW MEMBERS IN THE SPOTLIGHT

ABERDEEN STANDARD EUROPEAN LOGISTICS INCOME PLC is an investment trust investing in high-quality European logistics real estate to achieve its objective of providing its shareholders with a regular and attractive level of income and capital growth. The company invests in a portfolio of assets diversified by both geography and tenant throughout Europe.

BLOOMBERG is the global leader in business and financial data, news and insight. Using the power of technology, Bloomberg connects the world’s decision makers to a dynamic network of information, people and ideas, helping them to make faster, smarter decisions.

CTP is a top five European logistics property company and the largest full-service owner-developer of prime industrial and logistics property in the CEE region.

DEA CAPITAL a subsidiary of De Agostini SpA and listed on the STAR segment of the MTA Market of Borsa Italiana, is the leading independent Italian player in the alternative asset management sector, with combined assets under management of approximately EUR 23,000 million and an investment portfolio of approximately EUR 338 million.

GLOBAL NET LEASE is a real estate investment trust that focuses on acquiring and managing a globally-diversified portfolio of strategically-located commercial real estate properties that are crucial to the success of GNL’s roster of primarily investment-grade corporate tenants.

HOME REIT is a real estate investment trust listed on the premium listing segment of the Official List of the UK Listing Authority and admitted to trading on the main market for listed securities of the London Stock Exchange in October 2020. Home REIT will focus on well- located properties that provide a sustainable level of rent for the company’s tenants.

HUFVUDSTADEN offers office and retail premises in Stockholm and Gothenburg’s most attractive locations. The real estate company was founded in 1915 and today owns a total of 30 properties.

NEINOR HOMES is a listed company that develops new homes, both for sale and for rent, in Madrid, Catalonia, the Basque Country, Andalusia and the Valencian Community, and currently has nearly 5,000 units under construction.

NEXITY is a French commercial and residential real estate development and services company with a strong sustainability focus.

NORWEGIAN PROPERTY is a real estate company that has a portfolio in Oslo and Stavanger, Norway. Created in 2006 and listed on the Oslo Stock Exchange, it invests in major commercial real estate, offering its owners a publicly traded real estate portfolio.

PEACH PROPERTY GROUP is a Swiss residential real estate company investing predominantly in German Tier 2 cities close to metropolitan areas. Peach Property Group’s portfolio currently comprises 12,950 apartments in Germany and the greater Zurich region.

PLATZER is a leading real estate company in commercial real estate, only active in Gothenburg. The company owns, manages and develops 68 properties with a total of 825,000 m2.

SF URBAN PROPERTIES AG

is a real estate company based in Zurich. It is engaged in the development and management of an existing real estate portfolio, PAGE 29 as well as the acquisition of new properties. SF Urban Properties invests in commercial, residential and development properties.

Index focus Comparison of asset classes

FTSE EPRA Nareit Developed Europe Index

FTSE All-World 5000 Europe Index 4500 4000 JP Morgan Europe 3500 Bond Index 3000 2500 2000 1500 1000 500 21 JAN 11 JAN JAN 17 JAN JAN 13 JAN JAN 15 JAN JAN 12 JAN JAN 16 JAN 19 JAN JAN 18 JAN JAN 10 JAN 14 JAN JUL 03 JUL JUL 05 JUL JUL 02 JUL 11 JUL JUL 06 JUL SEP 03 SEP SEP 02 SEP 11 SEP SEP 06 SEP JAN 07 JAN SEP 04 SEP JAN 03 JAN JAN 20 JAN 17 JUL JAN 09 JAN JAN 08 JAN 17 SEP NOV 11 13 JUL 15 JUL 12 JUL 16 JUL 19 JUL NOV 04 18 JUL 13 SEP MAY 03 15 SEP 12 SEP MAY 11 16 SEP 19 SEP 10 JUL 14 JUL MAY 06 18 SEP 10 SEP 14 SEP NOV 17 NOV 13 NOV 15 MAR 05 NOV 12 MAY 17 07 JUL MAR 11 NOV 16 NOV 19 NOV 18 07 SEP NOV 10 NOV 14 MAY 13 MAY 15 MAY 12 20 JUL MAY 16 MAY 19 09 JUL MAY 18 08 JUL 05 SEP 20 SEP 04 JUL 09 SEP MAY 10 MAY 14 MAR 17 08 SEP NOV 07 MAR 13 MAR 15 JAN 05 JAN MAR 12 MAR 16 MAR 19 MAR 18 NOV 03 NOV 05 NOV 02 NOV 20 JAN 04 JAN MAY 07 NOV 06 MAR 10 MAR 14 NOV 09 JAN NOV 08 MAY 05 MAY 20 MAY 09 MAY 08 MAY 04 MAR 07 MAR 21 MAR 03 MAR 20 MAR 06 MAR 09 MAR 08 MAR 04 JAN 06 JAN

Value snapshot Developed Europe Index (March 2021) sector share * 1-year LTV value as of February 2021 and 10-year value as of 2021 0.5% Lodging/resorts 5.5%

2.0%

DEVELOPED LATEST YEAR TO 10-YEAR 3.5 Industrial/office 1-YEAR EUROPE (MONTHLY) DATE (LONG RUN) % Self storage Healthcare Average Total Return 3.62 -0.38 20.91 8.14 9.5% (%) Industrial Average Premium/ Diversified -21.84 -21.38 -25.21 -9.67 Discount to NAV (%) 29.1% Loan-to-Value (%)* 37.34 37.65 37.36 39.42

Average Dividend Office 3.45 3.56 4.05 3.83 11.4% yield (%) 30.2%

Residential Retail

8.3% Top 10 European performers (March 2021)

FTSE EPRA NAREIT GLOBAL INDEX

REIT INVESTMENT PRICE RETURN TOTAL RETURN STOCK NAME COUNTRY SECTOR STATUS FOCUS MARCH 2021 (%) MARCH 2021 (%) Hammerson UK REIT Retail Rental 33.96 33.96

Klovern B SWED Non-REIT Industrial/Office Mixed Rental 20.00 20.00

WFD Unibail-Rodamco NETH REIT Retail Rental 12.36 12.36

Irish Residential Properties REIT IE REIT Residential Rental 11.69 11.69

Nyfosa SWED Non-REIT Industrial/Office Rental 10.46 10.46

Unite Group UK REIT Residential Rental 9.89 9.89

Helical UK Non REIT Non Office Non-Rental 8.82 8.82

HIAG Immobilien Holding SWIT REIT Diversified Rental 8.46 8.46

Hufvudstaden SWED Non REIT Non Diversified Rental 7.83 7.83 PAGE 29 Kojamo FIN REIT Residential Rental 7.37 7.37 Square de Meeus 23 1000 Brussels, BE T +32 (0)2 739 1010

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