Composition Capital Partners hosted an event for institutional investors to discuss a key issue: How can one secure sustainable long-term returns in real estate? Two thought-leaders from the academic world, Dirk Brounen and Nils Kok, provided an insight into the changing face of real estate investment and the impact that ESG is likely to have on its future. Lara Muller of listed firm Corio and Maarten Vermeulen of Composition joined the open panel discussion that followed.
Dirk Brounen outlined the external changes that are challenging the fundamentals traditionally underlying real estate investments: diversification, stability and inflation hedge. These are still very relevant but market and regulatory trends affect real estate's attraction, notably in the European office market.
The panel recognized that the continuing ability of real estate to fulfill its role in an institutional investor's portfolio poses a real challenge for the real estate industry whose skills base is dominated by the traditional sectors. There is interesting long-term potential in the less traditional sectors; senior housing, healthcare & education related sectors, where more specialized and niche products are being created to meet strong and long-term user demand.
Maarten Vermeulen said, "Composition has picked up on this trend. Our strategy for Europe is focused on alternative sectors as a result of regulatory and demographic trends." Traditional sectors still present opportunities, but a change in the approach is required.
Quoting Lara Muller, "the real estate industry has a responsibility to ensure that buildings meet the requirements of their users and that they have a positive impact on the communities and environments in which they are located."
Nils Kok discussed the ever increasing relevance of sustainability for real estate. Referencing research conducted in countries like Australia, the US and the UK, it is clear that commercial markets are already recognizing the differences in values of buildings depending upon their environmental gradings. The payment of premiums for efficient buildings and discounts for those deemed non-efficient will continue in the medium term until supply evens out and efficient buildings become the norm.
Composition's Founder and CEO, Erwin Stouthamer, commented on the additional relevance of the Social and Governance dimensions of ESG: "At Composition we believe in our long-term responsibility. All parties: investors, users and communities, are to be considered at all stages of the investment process. This calls for a little extra attention and focus, which is not yet common-practice in the fund management industry.
"In working with our small and mid-cap operating partners, there is capacity for focus on responsible governance and long-term, balanced relationships to the good of all."
Composition's second Annual Client Conference will follow on from this event held in Utrecht by discussing the topic of fair trade in real estate fund management, which will take place on May 30, 2012 in Amsterdam.
Source: Composition Capital Partners