Baupost Discusses European RE At JPMorgan London Conference

JP Morgan Cazenove hosted two property tours in London and their (biggest ever) annual conference. JPM notes in a recent report that optimism is no longer confined to core markets, and across Europe both occupational and investor sentiment is the most bullish in years. This note summarizes the conference highlights. Why the interest to our readers? Although Seth Klarman did not speak, Tom Blumenthal, Partner & Co-Head of Private Investments for The Baupost Group, did.  Tom Blumenthal oversees private investments in debt, equity and real estate, and is a member of Baupost’s Management Committee. Although readers might prefer to hear from Seth, below are some notes from the panel discussion via JP Morgan Cazenove Conference January 14th 2014 (Note: JPM does not note which speakers made which comments, but we do know that Baupost is bullish on European RE).

Baupost Discusses European RE At JPMorgan London Conference


Regarding European RE, JPM notes that 1) total return expectations from CEOs and investors seem optimistic to us; 2) however, a wave of capital is bearing down on European property in 2014; and 3) London offices are in delivery phase, next comes derisking.

Panel 1: Winning trends for 2014

British Land, Chris Grigg, Chief Executive Officer
Deutsche Annington, Rolf Buch, Chief Executive Officer
SEGRO, David Sleath – Chief Executive Officer
Thames River Capital LLC, Marcus Phayre-Mudge, Fund Manager
The Baupost Group, Tom Blumenthal, Partner & Co-Head of Private Investments
Moderated by: Robert Fowlds, Head of UK Real Estate Investment Banking Team

On where to find opportunities

UK Retail is seeing definite increased demand for stores across the UK. Tenants have increased clarity on their expansion plans. Remain cautious on secondary “not seeing any recovery.”

German residential will see rents increase over the rate of inflation, which remains low. Despite expectations for shrinking populations, recent data showed its actually growing due to immigration combined with household demand derived from smaller household sizes could help rental growth further.

Selected European industrial and logistics markets are seeing the best environment in four years, with upside risk to GDP. The best markets are seeing a shortage of space due to lack of development, which remains low.

The internet is a driver of massive change in logistics. Opportunities exist on the edge of major conurbations, targeting the last leg of delivery.

The last 25 years has seen warehouse space in London fall by 40%….

On the UK, very positive, I would say the most positive for a few years”

Areas of low liquidity represent opportunities for investors with long term capital.

Deleveraging provides the entry opportunity.

On capital flows for 2014

There is a wave of private capital targeting European real estate.

Direct investment by overseas investors into the UK will increase in 2014, and will spread into the regions.

There is a ‘bun fight’ for direct real estate in the UK.

On REITS and the European listed property market

There is an opportunity to meet the demand for real estate exposure in a liquid, transparent form.

The growth enjoyed by the US market over the last decade makes the level of progress in Europe “heartbreaking.”

Moving forward, we need to trust management, ensure alignment of interests and encourage lean, efficient cost structures.

On the risks ahead

Bond yields and US tapering will ¡§impact property values more than anything else.

Debt markets remain complacent. It is possible to cheaply lock in low interest rates for a long period.

Long term economic recovery is the main focus. Cautious around central bank measures, especially the Bank of England with the unemployment target.

“Very concerned about an increase in bond yields without growth.”


Saved Articles

The Life and Career of Charlie Munger

Charlie is more than just Warren Buffett’s friend and Berkshire Hathaway’s Vice Chairman – Buffett has actually credited him with redefining how he looks at investing. Now you can learn from Charlie firsthand via this incredible ebook and over a dozen other famous investor studies by signing up below:

  • Learn from the best and forever change your investing perspective
  • One incredible tidbit of knowledge after another in the page-turning masterpiece of a book
  • Discover the secrets to Charlie’s success and how to apply it to your investing
Never Miss A Story!
Subscribe to ValueWalk Newsletter. We respect your privacy.

Congrats! Are you a smart person?

We have an exclusive targeted & limited time offer for being a sophisticated and loyal reader.

ValueWalkPremium is a website and newsletter on the latest industry news much of which is not in the public domain and obtained via our sources.

We also have 10 years of resources on how to use this information to better your investment process.

Sign up for  today and get our exclusive content for 40% off. This is our second biggest discount ever!!

Use coupon code VIP20 or click on the button below

Limited time offer only ENDS 4/30/2020 or after the next 40 subscribers take advantage whichever comes first – please do not share this discount with others