Further consolidation in the real estate investment management industry should be expected this year, driven in part by some of the largest firms acquiring smaller specialists, according to capital advisory firm Hodes Weill.
Although COVID-19 restrictions have weighed on M&A activity, three companies that have a strong presence in industrial and logistics real estate have been acquired in recent months: M7 Real Estate, Exeter Property Group and Tritax Management. In a report published this week, Hodes Weill has predicted that this trend will continue 鈥渁s large cap managers target specialists to access new products, sectors and markets鈥�.
Companies with presence and expertise in logistics real estate are likely to be the most coveted. In January, Oxford Properties, owned by Canadian pension fund OMERS, confirmed its acquisition of fund manager M7 Real Estate as part of plans to invest 拢3bn (鈧�3.48bn) in European industrial markets.
David Hodes, co-founder of Hodes Weill, said the Oxford-M7 tie-up 鈥� along with the merger of EQT and Exeter, and the 60% buyout of Tritax by Aberdeen Standard Investments 鈥� were 鈥減rime examples of large cap managers targeting sector specialists to access new sectors and to enhance their geographic reach鈥�.
Hodes told 91传媒在线: 鈥淔or investors globally, industrial and logistics have become increasingly sought-after, and are trending up as a percentage of investors鈥� overall portfolio allocations.
鈥淎s a result, I expect that larger institutions will continue to look to M&A transactions to expand their capabilities in these sectors. We will likely see increased M&A activity in other sectors with strong fundamentals and growing institutional allocations, such as data centres, cold storage, and life sciences.鈥�
The total number of M&A transactions last year fell below levels seen in 2019 and 2018, although transactions involving firms with less $7bn (鈧�5.76bn) of assets under management continued to rise.
M&A activity has been boosted by firms that specialise in acquiring minority stakes, including Goldman Sachs鈥� Peterhill, Neuberger Berman鈥檚 Dyal Capital and Aberdeen Standard Investments鈥� Bonaccord Capital.
Minority sale transactions represented 56% of activity in 2020, and Hodes Weill said such buyers were expected to continue to pursue deals.
COVID-19 restrictions have subdued the M&A markets, and Hodes Weill said successful vaccine rollouts could bring about an 鈥渦ptick in transaction volume鈥�.
鈥淚 think we will see an increase in transaction activity once the world returns to 鈥榥ormal鈥�,鈥� Hodes told 91传媒在线.
鈥淕oing into 2020, we saw a lot of managers looking for strategic opportunities. Today, we continue to hear from managers that are looking to transact either for strategic reasons or for succession planning.
鈥淚n all cases, and particularly for majority transactions, the qualitative piece is key. It is hard to sell or acquire a business when parties can鈥檛 meet face-to-face. While technology and virtual meetings have been helpful in moving some transactions along, it is not a replacement for what can be accomplished by in-person discussions.鈥�
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