Urban Living webinar: Investor sentiment

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In the latest IHM Urban Living webinar, more than 450 sector leaders signed up to hear how investor sentiment has been effected by the coronavirus crisis across all sectors of the hospitality industry.

Scheduled fortnightly on Wednesdays at 2pm BST, editor-in-chief George Sell is hosting an urban innovator webinar series in the run up to URBAN LIVING FESTIVAL 2020: stay-live-work, November 25-26 at Tobacco Dock in London.

The most recent webinar explored investor sentiment across hotels, serviced apartments, student housing, coliving, hostels and short term rentals.

Joining Sell in the discussion were Michael Abel, partner at TBG; Christian Birrell, investment fund manager for the COLIV Fund at DTZ Investors; Lissa Engle, founding and managing director at Berkeley Capital Group; Mai-Lan de Marcilly, director of real estate private equity at KKR; and Florian Schmitz, founder and CEO of Resonance Partners.

Sell kicked off the conversation asking the extent to which the pandemic has effected investment strategies over the last few months.

Abel began: “The investments we have made more recently have all been sectors or platforms that, on a relative basis, are more downturn resilient. So we’ve invested a lot across PRS, student housing, and continue to invest in industrial logistics.”

“I believe we are at the beginning of a major repricing and I think the next few years ahead of us could be more interesting. In terms of strategies, most that we already have in place will continue; they are generally based on secular trends and investments that we like. I do think we will add a few new ones: for example, the hospitality sector could become more interesting.”

De Marcilly agreed: “Our view post-COVID is that the “bed” sector is going to become even more interesting for a few reasons. The first one is that residential is more resilient than others given the secular trends. We believe that there is going to be more appetite from investors and institutions going forwards to refocus part of their portfolio towards this sector.”

She continued: “The second is affordability, and we’re targeting two different areas. The first one being households… the second is around coliving. We do believe that more people are going to be more attracted to places where they are not on their own.”

The general consensus around current business activity and the overall appetite for future investment was varied. Engle said: “Business if anything is busier. Because of the market and because of the difficulty, we are finding that we have to go back and underwrite with our partners. Obviously the risk is different now on the projects… and the funding market is difficult. You’re not getting more leverage, you’re getting higher cost of capital. You have to work it through and see, other than renegotiating the purchase price, where else can you find some quick wins.”

Offering a US perspective, Schmitz added: “We’ve been focused on less-cyclical assets. Multifamily and other residential investments, as well as logistics have continued to perform well. We’re not just looking at the pandemic as a medium to long-term factor, we also think that globalisation is changing when it comes to industrial logistics. There is certainly a trend to take a more national approach… and cities aren’t really growing anymore. There is some concern that major cities will become less attractive in the long-term.”

Moving to talk about sector-specific details, Sell questioned whether there’s going to be a big shopping spree for distressed hotel assets within the next six to eight months. Abel expects this to happen at the beginning of 2021, stating investments will depend on geography and which category assets fall into. “Budget space in limited service is more resilient because of cost structures,” he explained.

Looking at serviced apartments, Engle agrees that this asset class will receiver greater investor interest due to its flexible business model. “We’re working on one already. Pre-COVID we had a dual site and the underwrite for the hotel was very easy - we had to really discuss the attributes of the serviced apartment. That has very much shifted now as it’s a very attractive product.”

She continued: “You will see them catering more towards the leisure traveller… [though] arguably those that are coming back as corporate will have longer stays. Yes the product will be tailored, but you also have the upside that when corporate does rebound it’s going to be for longer stays.”

Similarly, the lean cost model of hostels has resulted in a swifter timeline of recovery than other hospitality businesses. Speaking about a&o, Abel said: “As we see the different economies across Europe opening up, we’ve seen strong pickups and spikes. I believe this is a very attractive business model; it’s becoming more institutional and the budget space has proven to be more downturn resilient - something that investors value.”

Turning to coliving, Birrell mentioned that the self-contained nature of units has been beneficial to members, but a shift in working habits is prompting a design re-evaluation. “People will be working from home a lot more, and we need to think how to facilitate that better than we already were. Every building has a substantial amount of coworking space… that’s really the area that we’re focussing on.”

To watch a full recording of the webinar, click here.

Our next webinar on ’Workspitality®’ will be hosted by CEO of IHM Piers Brown on June 24th at 2pm BST. Participants include:

Stéphane Bensimon, president and CEO WOJO; Work, Share, Live
David Kaiser, head of real estate UK and Ireland, WeWork
Matt Watts, chief commercial officer, LABS
Debbie Wosskow, OBE, cofounder, Allbright

Click to register here.

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