The CEO of the European Public Real Estate Association (EPRA), Nick van Ommen, has been spending quite a lot of time in Germany recently, participating on panels discussing the development of the German REIT (real estate investment trust). What we fear is that two separate proposals seem to be emerging. It’s far from ideal and it would be better to align the industry behind a common approach.
EPRA is supporting the structure being advocated by Dr Hans Volkert Volckens at Beiten Burkhardt. Obviously the arrival of a German REIT structure is a really important issue for us and we’ll help as much as we can – using our tax transparency committee and whatever else it takes to get this moving forward. I was in Frankfurt myself recenty and the consensus of opinion was that the REIT will not emerge before 2007.
We’re not so involved with the UK REIT preparation but that process is firmly in place with the BPF (British Property Federation) and others, and we can easily mobilise our resources and people should the need arise. Nick van Ommen has also been speaking with a number of other parties from smaller countries but there’s nothing really to comment on at the moment. They might be seeking an update on the situation in the UK and Germany with a view to replicating elements further down the line.
We’ve formed a new working committee devoted to “broadening the investor base” which was really the theme of our conference in Paris in September. The chairman of the committee is Paul Rivlin, joint CEO of Euro Hypo in London.
Paul’s responsibility is to pull the committee together and get it working on themes that will help take the message of European and global listed real estate to
a broader audience. We would really like to see our investor base broaden to include some of those
big pension funds that don’t have any property exposure at all.
These include the Norwegian Petroleum Fund,which is the fourth-largest fund in the world and has no property exposure. These are the type of people that we’ve got to start convincing. Secondly, we would really like to get the message across to the retail investors.
The introduction of derivative/ETF products in the listed sector means a smaller pension fund or retail investor can now buy in quite simply and get exposure to property.
All these products are based on our indices and we’ve been pushing the concept to all the big ETF providers. We’re really pleased that major players like Barclay Global Investors and AXA have got involved and I’m sure more will join them in 2006. It really adds a new degree of flexibility to the market. It’s attractive to smaller investors and also gives options to the larger institutions as well. For example, they can lend stock to the ETF or use it in a number of other tactical ways.
The amount of liquidity in these markets is critical to the institutions and I think it will grow steadily. Take the AXA fund for example. Since its launch almost a year ago it has gone from zero assets under management to a quarter of a billion euros. And it’s now the second-ranked product in terms of assets under management in AXA’s broader ETF portfolio.
So I would say that the appetite’s there, it’s really just a matter of companies like AXA getting the message across to investors and for us as an association to educate the broader investment community as to the benefits of the European and global real estate sector. We must make investors aware of what’s available, how they can use them, and what the opportunities are.
We see ETFs as the first step towards a fully-fledged derivatives market – a long-standing goal of ours. You only need to talk to exchanges like the London Stock Exchange and Euronext, for example. Once they see a demand-driven ETF market then they will consider dealing in property-based futures and options.
We decided to partner with FTSE Group in February this year. The index was renamed the FTSE EPRA/NAREIT Global Real Estate Index. That was an important development for us. It meant we could get it on to a new level of professionalism. The index is now available real time on a global basis; it’s disseminated 24-hours a day. That’s a first in the real estate world so it puts us head and shoulders above what else is out there.
Investors can get the latest movements in the index on a real time basis from the industry websites and from all the major data vendors such as Bloomberg, Reuters and Factset.
And in regard to our index series we’ve got a road map of developments for 2006 that is currently sitting with our three regional index committees. There are a number of major items on it which have been designed to enhance the index package.
Our 2005 annual conference was well received, with good feedback from the panels although, of course, some worked better than others. While we were happy with the conference, we always want to do better. Next year, it takes places in Budapest in September. The format will be similar but we will make modifications to achieve more interactivity and get the audience involved in more discussions.
Nick van Ommen and I always attend NAREIT events and as I write this we’re just off to Chicago for the NAREIT executive board meeting. Prior to that we will be giving workshops on European real estate to institutional investors in San Francisco and will do the same again after the Chicago board meeting for investors in New York.
For many of them it will be the first step towards deploying their money in Europe. Our best practices committee recently held a workshop in the Netherlands and devised a series of recommendations to be voted on by our membership. They will meet in December and go through each of these recommendations. To guarantee inclusion in the updated version of the Best Practice Recommendations, a proposal must have at least a 75% approval from the membership.