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"The easy wins are over. In the past, most investors in real estate have done well; it will be much more challenging going forward" |
Macquarie’s real estate division is among the fastest-growing businesses of one of the world’s most rapidly expanding banks. Since the launch of its real estate business in the mid-1980s, Macquarie has created seven listed and 18 unlisted property funds and now manages 700 properties worth A$24 billion ($20.5 billion). The business is run by 490 staff in 10 countries. Sydney-based Stephen Girdis is global head of real estate at Macquarie and has overseen much of this meteoric rise. "One of the hallmarks we’ve got is a combination of hands-on property skills and financial skills," he says. "In the Reits business they’re the two skills you need."
That expertise has helped the bank to build an eclectic range of listed real estate. It has five Australian-listed property trusts, but none of them limits its holdings to Australia. Some are active in Europe, the US and Mexico, and one, Macquarie DDR Trust, invests only in the US. Between them they cover office, grocery-anchored retail, value and convenience retail, warehouses, marinas and theme parks.
"Each has a different strategy or sector focus, which we think leads to better performance," says Girdis. "You know the marketplace better, and the class of assets better, when you have a dedicated team focusing on them."
Macquarie isn’t active only in onshore funds. It has Macquarie MEAG Prime Reit, a Singapore-listed retail and office real estate investment trust, and the Macquarie Central Office Corporate Restructuring Reit, listed in Korea. Its unlisted offerings cover all major property classes and geographical coverage includes Australia, China, Hong Kong and Europe.
Along the way have come many firsts: sector-specific listed property trusts; the first foreign asset management company authorized to manage a Reit in Korea; one of the first wholesale funds investing in core retail property in China; and numerous structural innovations, from CMBS programmes to reset preference units.
Around the world there are joint ventures and strategic alliances with companies and financial institutions such as California’s Maguire Real Estate, Brandywine Realty Trust in US office space, Principal Global Investors, ProLogis, Schroders (with which Macquarie owns the First China Property Group joint venture) and Abu Dhabi Commercial Bank.
"If it’s not our experts, we’re partnering up with the best-of-breed partners in their own region," says Girdis. "Where we’ve seen an opportunity for a marketplace and partnered up, we can move our investors’ money into markets more quickly and effectively than trying to do it on our own."
Changes in legislation allowing Reit markets to develop across Asia and Europe will provide further opportunities to Macquarie. Alongside it, Girdis notes, there is a growing trend to unlisted capital as pension funds develop in Asia and offshore money floods in from other parts of the world.
Macquarie – which ranks fifth globally among investment managers and first in Asia in this year’s poll – has property assets in Asia of about $7 billion, up from $3 billion a year ago. Should we expect to see the bank more active in China and India?
"Absolutely, yes," says Girdis. "They’re tricky markets, and we’ve very much focused on specific strategies, doing selected things well rather than everything a little bit. In the medium term there will be Reits in China, we’d like to be part of that industry. And in India we are looking at specific things to get started with."
