We have been seeing a growing number of joint venture and club deals in recent years. Do you think this will be the trend going forward? Where are the underlying opportunities?
Joint ventures, club deals and partnerships have, in my opinion, sustained our industry during the last two turbulent years, and created many advisory opportunities for my Cushman & Wakefield colleagues around the APAC region.
During the COVID-19 period, investors worldwide who have been unable to travel have inevitably deployed more capital via existing fund managers. We’ve heard the importance of having “boots” or operational capability on the ground repeatedly.
It’s certainly not a universal truth — when we see some fund managers rolling out fund-after-fund with hardly a pause for breath on capital raising and deployment — but in many instances the flexibility that a joint venture, a club deal or a partnership can offer may lead to faster assembly (via shorter gestation periods), and a tightened capital raising window.
In a period when we have seen new sectors emerge strongly — including logistics and its sub-sets such as cold-chain, residential for lease (beyond Japan), and data centers — the first mover advantage and deployment has often been executed through these “hybrid” models.
While institutions may be more inclined to deploy into non-listed real estate funds and private REITS in Asia Pacific via fund managers, in turn most of those managers will have examples of hybrids in their positions. Such positions and opportunities will remain both relevant and critical to our community, and for institutions a look through approach is needed to determine risk / reward. Many do enjoy a seamless lifecycle. However, we are increasingly being brought in to advise on and help unpick models where aligning interests, and presenting to the market a clean product for divestment, is initially challenging. The root causes can include the existence of minority interests, capital partners that wish to remain, and the marketing impact that comes from the existence of first and last rights, pre-emptions, and so forth. Hurdles such as these can detract from the true value and quality of the underlying real estate.
Through our repeated advisory involvement and a growing depth of case studies, we are confident that pitfalls can be avoided, and opportunities grasped.
These opinions are the author’s own and do not necessarily reflect the views of Cushman & Wakefield. To find out more about how Gordon Marsden views opportunities across the Asia Pacific retail and office sectors, click his profile and get in touch. For more on investment opportunities across Asia Pacific, visit our Real Estate Investment Hub here. External Link