Barings, one of the world’s largest diversified real estate investment managers, announces that it completed c. €2 billion of real estate transactions in Europe in 2020, across equity and debt. Looking to 2021, Barings is targeting €3 billion of investments across debt and equity as it looks to respond to COVID-19 related market disruption and prudently deploy the capital it raised for its core and value-add strategies in 2020, as well as its separate account and co-investment ventures.
Disciplined approach to divestments helping drive outperformance
Having delivered exceptional sales results – in particular in late 2019 and early 2020 – with c. €1.7 billion of disposals, Barings continues to remain disciplined in its approach to disposals. 2020 marked the first time in four years that Barings acquired more assets than it sold. 78% of disposals took place in Germany, followed by both France and Italy with c. 11% each. A number of these divestments were completed significantly ahead of business plan, including the sale of a Paris office property that had been completely refurbished and let to a well known fashion brand. The sale to a French institutional investor on behalf of a value-add strategy produced an IRR of more than 40%. Barings also sold a German office development in Berlin to an international investor on behalf of an opportunistic investment strategy, delivering an IRR of more than 35%.
Having surpassed €2 billion Gross Asset Value during the year, this approach helped Barings’ flagship core strategy outperform the INREV and MSCI benchmarks. In the latter it was ranked number one on a quarterly and three year basis.
Local network integral to supporting transaction volumes throughout the pandemic
Barings’ local European office network allowed it to visit and assess opportunities despite the restrictions on flights and international travel brought about by COVID-19. Providing execution certainty for counter parties also led to Barings transacting 94% of its acquisitions off market. In Germany €612 million of equity investments were completed in 2020, accounting for 53% of total acquisitions (2019: 56%). This was followed by Sweden, where 21% of purchases were made (2019: 10%), as Barings continued to increase its investment activity in the Nordics.
Investors’ appetite for risk driving core+ and value-add investment
Compared to 2019, Barings noted an increased risk appetite amongst its client base, which is reflected in a noticeable shift from pure core investments comprising just 14% of the total acquisition volume in 2020 (2019: 40%), to core+ and value add, which accounted for 57% (2019: 40%)and 28% (2019: 21%) respectively.
Offices, logistics and residential remain key conviction calls for 2021
Industrial and logistics remains one of the Company’s long term conviction calls, with the social and technological drivers accelerating in 2020 due to the pandemic. Although just €38.8 million was invested in residential in 2020, compared to €125 million in 2019, Barings’ living portfolio now comprises some 1,130 residential units and 267 student beds completed or in development. The asset class will become a key target in 2021 with about €350m to be invested in this sector over the next 12 months.
Further growth of the debt platform planned for 2021
Barings completed c.€375 million of senior and whole loan investments in 2020, while its existing loan portfolio of €2.6 billion performed well, benefitting from minimal exposure to sectors like retail and hospitality. 90% of the loans originated in 2020 were in the student accommodation, logistics and office sectors. With c. €850 million ready to deploy across Europe, Barings has a further pipeline of c.€450 million of opportunities that are already at advanced stages for 2021.
Source : Barings