Swiss Life Asset Managers takes the top spot in PropertyEU's annual Top100 Investors ranking by assets under management in Europe, climbing two places from last year as it expanded its portfolio further through residential and commercial property acquisitions as well as buying development sites.
With some €89 bn of AUM in 2019, up from €81 bn in 2018, the Swiss insurance group remains more than €20 bn larger than the next two players in line, AXA IMRA and CBRE Global Investors.
The top two firms are both insurance companies, followed by CBRE Global Investors, which is broker-owned. Following them is bank-owned Credit Suisse, and then the listed sector comes into play as Vonovia of Germany and Paris-based Unibail-Rodamco-Westfield (URW) make an appearance in the top end.
The rest of the top echelon consists of insurance company Allianz, asset management firm The Blackstone Group, German bank Deka, and German listed company, Patrizia.
Top100 add €220b
The Top100 companies recorded €1.9 trn of assets between them, up from €1.68 trn in 2018, no doubt reflecting the pressure upon and desire of asset managers to keep acquiring real estate in its different forms. Rising values will also have helped.
An increase of €220 bn in one year for the whole set equates to an average increase of AUM per constituent company of €2.2 bn, but of course the reality is that firms at the top end skew the figures. Some of the largest firms have net annual investments of up to €10 bn. This year’s ranking presents a similar picture to recent years, when the vast majority of the Top100 piled on AUM. We counted a total of 83 out of 100 companies which grew their assets.
The leading investor, Swiss Life, for example, added €5.5 bn in just the first seven months of 2019 alone, which was an increase of 6.8% on the previous year. Stefan Mächler, group CIO of Swiss Life, said at the time the game plan was to continue to grow in those parts of Europe where there was heavy demand from institutional and private investors.
In Switzerland, where it is the largest owner of privately held real estate, the focus was on incremental portfolio expansion through both residential and commercial assets as well as buying development sites. In a way, the company underlined how many behaved in a long-running upward curve: by adding ‘forward-looking’ segments with growth potential such as health care properties, student housing, and coworking spaces. But it still made big classical bets such as a core office portfolio in Paris worth €1.7 bn.
Arguably, analysing the companies which decreased their AUM or remained the same says more about the specifics of the real estate market than looking at those that grew.
We counted just 17 instances of the Top100 players seeing a fall in AUM. Looking at the top 20, only two companies saw a net decrease in AUM. Those were Aberdeen Standard Investments and ECE Projektmanagement.
Meanwhile, Unibail-Rodamco-Westfield (URW) barely moved. What do ECE and URW have in common? Retail property.
In 2018, Unibail catapulted up the rankings after taking over Westfield that same year. However, two factors have come into play that in 2019 has led to a reduction on that larger number. One, the threat to bricks-and-mortar shopping from ecommerce has been real, given 88% of the company’s assets were retail property, and two, pressure to reduce its debt burden. URW responded with a €4 bn-plus asset disposal programme to delever and reduce exposure to non-core assets, including its weakest performing areas of retail property. And it has had success, reducing its Loan-To-Value to 41.5%. It has also scaled back a development pipeline to €6.1 bn, a reduction of €2.1 bn.
ECE, the Hamburg-based shopping centre investor, has demonstrated a different response by starting to make moves in non-retail-related asset classes. For instance, the company debuted in the UK residential market by partnering with Art-Invest Real Estate and Dukelease to develop an apartment building in London’s West End. The entrée to the UK residential sector has been followed up by acquiring 2,100 housing units in the UK regions from build-to-rent developer Dandara. ECE is expected to find such opportunities in other European countries too. But overall, our data suggests its AUM shrank in 2019. Redevco is another example of a retail specialist which registered a drop in AUM.
UK fallers
It is also notable that four of the five largest UK listed property companies saw their AUM fall over the course of a year: Landsec, British Land, Hammerson, and Intu Properties. Is this the Brexit effect? Certainly, Brexit has put pressure on share prices but perhaps the issue is more sector-specific. The only UK listed propco in the Top100 to register AUM growth was Segro, the industrial and logistics company.
The appetite for logistics continues to spill over into 2020. Segro COO Andy Gulliford recently took part in a PropertyEU event during which he highlighted how the firm had raised over €1 bn via an oversubscribed share posting this year and enjoyed success with a well-subscribed debt bond offer. ‘It’s not just the purchase of direct real estate, capital is coming to us in a variety of forms which is interesting.’ He added: ‘I’m convinced it’s because people are recognising logistics is essential infrastructure. They are seeing real estate for what it is; it was always seen as operational, but this year has confirmed it as cashflow certainty.’
In contrast to Segro, the other four UK listed companies have experienced a valuation drag from exposure to retail property. For example, by the end of November 2019, Landsec booked a 2.8% fall in the valuation of its shopping assets in the six months to September 30 as a series of retailers went into administration such as Debenhams. Landsec saw like-for-like retail rents fall 1.5%.