Webinar
ULI Europe and PwC Emerging Trends?? 2023 Report Launch
Date: November 03, 2022

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Welcome everyone.

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Welcome to this year's launch of the UI and PwC

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emerging trends in real Estate Europe 2023 report. We'reverypleased with this year's launch as it marks the 20th

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anniversary of this important report and especially because
so many

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of you have contributed this year. More than 900 industry

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professionals from across Europe have contributed to thereport.
Either through an interview, participating in the survey orroundtablediscussion and also as part of the 20th anniversary, the

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report not only covers the short term outlook, but also

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looking back 20 years and 20 years ahead, we are

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very pleased with the collaboration with PwC.

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For all these years and also this year, it was

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a pleasure to work together.

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Today we have the kickoff and I'm looking forward to

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the presentation and the discussion later, but the report is

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also available on our website and on PWC's website. And

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as you may have already seen, we have quite a

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lot of additional launch events planned physically across ournational
councils in Europe did a different countries.

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For those of you who want to make a comment

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or ask a question, you can use the Q&A button

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that you see at the bottom of your screen. And

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now I'm very pleased to hand over to Gareth Lewis

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from PwC.

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Who will open the webinar with a presentation of themain results?

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Garrett, over to you.

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Thank you, Lisette. Good afternoon, everyone. Suzette said
I'm Gareth

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Lewis from the PwC real estate team based in London

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and on bar for PwC. I'd like to first of

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all take the opportunity to thank Lizette, Sophie and the

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UI team for their efforts in collaborating with PwC to

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deliver this report, I think which we have in in

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what has been quite challenging market, market
circumstances. So it's

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my pleasure to spend the next 15 minutes or so

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talking you through the the key highlights of the emerging.

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Friends and real estate report it. This is a forward-looking

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report that I think is is unique in terms of

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the quality of input we get from senior real estate

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professionals at the at the coalface of the industry. Next

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slide please mark.

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And for me this has been one of the perhaps

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the most sort of interesting years I've been involved in

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in the research. And it's also interesting for the reason

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that Lizette said that this is the 20 year anniversary

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of the European report. So. So I definitely encourage you

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to read chapter seven of the report which which takes

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that 20 year looking back and looking forward view. But

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as Lizette said, I wanted to also point out that

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today's webinar is actually going to be very much focus

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on the the here and now.

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The outlook for for 2023 and in that sense that

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the reality is that the outbreak of war in Ukraine

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has cast a long shadow over Europe and real estate

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like any other industry will have to deal with the

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economic and political fallout for the foreseeable future. So
thetitle of this year's report, the eye of the Storm

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is is self-explanatory and I'll run you through the key

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highlights following the the themes shown here. First of all

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a general sentiment of reality superseding optimism.

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Secondly, the the wide array of shifting concerns impacting
realestate businesses. Thirdly, capital pulling back from thesector and

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4th we'll look at the top sectors and cities towatch out for for 2023. And finally the the theme

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of around fit for purpose real estate. Next slide please.

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So if the the third year of the pandemic was

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supposed to offer, in signs of hope, hope, the outbreak

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of war in Europe has delayed recovery and exposed
significant
structural weaknesses in the economic, social and politicalfabric of

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Europe.

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Beyond real estate fundamentals like supply and demand,the market

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has an almost unlimited number of distractions and these are

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bricks in the in the wall of worry as the

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US version of this year's report called. It will continue

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to be very fluid and the ultimate direction that many

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of these take would have an impact on what kind

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of year many of us would have from a business

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perspective in the 2023. The GFC and the pandemic,
althoughthey were developing over time, felt like they hit us

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comparatively quickly.

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But this time has that feeling of being a rather

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slow moving downturn that will have us evaluating thepotential
impacts for for many months. It's clear that 2023 will

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be a tough year in any event as some industry

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leaders contend the recovery may not emerge until early2024.
And while the proportion expecting business confidence,
profitability and headcount

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to increase has fallen compared with 2022, as you can

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see in the chart here, the overall share is still

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higher than in the first year of the pandemic.

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In 2021.

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Next slide, please.

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European real estate faces a challenge from a quartet of

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intelligent economic headwinds. Concerns over inflation,interest rates and European

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and global economic growth are all up sharply are on

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last year and even last year they were all considered

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very significant concerns and the fact that they've risen to

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the top of the concerns is to be expected I

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think. But the the level of concern is still remarkable3

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ranging from as you can see here 81 to 91%

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and that.

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Compares with the top business concern last year, whichwascyber security of just 67%.

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Inflation is a concern across the board, with at least

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90% of those surveyed in the US major markets, including

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Germany, UK, France and Spain, indicating their high levels
ofconcern.

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And I think if you look forward actually as you

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click through Martha for inflation, if you look at the

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three to five year term and the timescale is interesting,

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but if you should see on the previous slide what

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it was showing is that the a clear consensus that

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inflation will actually be a short term concern.

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Next slide, please.

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Seven out of 10 respondents believe Europe will move into

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a session before 2023 and and the views about the

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the prospects for the economy and the real estate sector

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have become rapidly more negative as a summer of
uncertainty
turned into an autumn of consistently downbeat forecasts.
But the00:07:11 --> 00:07:15:
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economic circumstances and and market conditions behindprevious downturns are

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all quite different from what Europe is experiencing today,
andit's clear that the the outlook for the real estate

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industry will very much depend on the severity and duration

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of the recession.

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The chart shown here on this slide gives an indication

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on participants views or the impact of a prolonged
recessionary
environment on European real estate. Though leasing activity
has held

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up reasonably well for much of 2022, participants are
unanimousin their put opinion that a recession will lead to

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occupancies and rents falling even in previously performingstrongly performing

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sectors.

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And recession across Europe is also expected to further the

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hit to development activity provoked by the last two years400:08:02 --> 00:08:06:

of supply chain difficulties, increasing high borrowing costs
and a

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general lack of financing. And with widespread forecasts of a

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decline in consumer spending, retail is likely to be the

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first first to suffer, but potentially with knock on effects

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in the the logistics sector, with, for example, some
respondents
stating the view that retail occupiers are looking to rationalize

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their real estate space.

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Including using surface doors for distribution, warehousing
and thus potentially

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reducing demand for logistics assets.

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Next slide, please.

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Now, whether it's equity or debt for new investments and

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refinancing, all for development, more respondents think
availability will decrease

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and stay the same or increase in 2023.

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Well, they real estate companies are not as leveraged as

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they were going into the global financial crisis, largely due

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to regulatory changes in the past decade and 1/2 double

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digit inflation in some territories continues to weaken investor
demandgoing into 2023.

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Capital raising is likely to be likely to be challenging

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regardless of source and survey respondents believe capitalfrom every

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region of the world is less likely to increase in

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2023 compared to expectations last year. Next slide, please.

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Despite all of this, a a somewhat surprising outcome of

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the surveys that only 40% of respondents believe returns in

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2023 will be lower than last year.

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In my view it's you know, I've been involved in

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this research 8:00 or so years. I think this is00:09:41 --> 00:09:43:

the the one particular question which I think is most

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impacted by participants tendency to view through rose, rose,tintedspectacles. Next slide please.

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Here are the top 10 sectors ranked by overall prospects

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for 2023 and as a sign of the times, new

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energy infrastructure tops the sector rankings for the 2nd
successive
year and this sector covers a wide range of real

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assets such as solar, wind, battery storage and electrictransport
5

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infrastructure. As well as partly reflecting the energy crisis is
top banking also as part of a wider longer term

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trend in which investors are rebalancing holdings away frommainstream
real estate alternative sectors that will benefit from the mega.

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Been such a demographics, climate change and technology.

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Various forms of housing dominate the top 10 picks, as

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they have done for several years, despite increased
concerns over

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political risk in the sector. And on a broad level,

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there's an acceptance that the balance between residential
supply and

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demand in European markets has not changed in the past

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year, and it's unlikely to change anytime soon.

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Despite the overall uncertainty about the near future, theinterviews
and roundtables reflect differing views across sectors,
specialisms and geographies.

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Although last years safe having sectors such as logistics are

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certainly challenged by the macro economic environment, thepure logistics

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specialists remain more buoyant than most of theircounterparts in

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other sectors.

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The office sector has continued to be the most discussed

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and polarised sector and uncertainty around the future of
officeutilization keeps the sector near the bottom again this year.

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Next slide, please.

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Here, the top ten cities ranked by overall investment and

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development prospects for 2023 prospects for all 36 cities
coveredby emerging trends. Europe has deteriorated since last
year's report.

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Customary safe havens in Germany such as Berlin,Frankfurt, Munich

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and Hamburg do not enjoy the same steady positive
sentiment
as in previous years, reflecting the potential impact ofinflation
on Europe's largest economy and its dependency on Russiangas.
Berlin has slipped one place down the rankings this year

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and, and like most German cities, has registered one of

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the larger reductions in schools across Europe. But the city

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6

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still attracts the enthusiasm of many market players andstandsout from other German cities covered in the survey.
And for that second successive year, London remains themostfavoured city in Europe, which overall prospects, especiallyfor office

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and artistics and the depth of London's investment market,
reflects
the extent of its broader metropolitan area, something that's
only
rivaled in in Europe by Paris, which takes over second

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place from Berlin this year.

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In this evolving, evolving environment, national andinternational transport connectivities

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also seen as a key influence, a feature where Paris

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is again prominent and is particularly relevant for for those

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cities that have risen up the rankings this year, such

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as Madrid, Lisbon and Copenhagen.

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It was one of the fastest growing cities in Europe.

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Madrid rises this year from 6th to 4th place. 4th

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place where urbanization is continuing apace, are seemingly
unaffected by

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the pandemic and and potentially due to inward immigrationfromelsewhere in Spain and overseas.

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Next slide, please.

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So caught up in a a whirlwind of long-term upheavals

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and demographics, climate change, technology andlifestyles, real estate faces

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a major challenge to be fit for purpose, which was

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a core topic explored in this year's research that the

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threat of obsolescence over the next five years continues to

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be concerned. Nearly half of respondents. And there's also a

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strong view that places places need to be more flexible

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to cope with more rapidly changing occupational demands,
and this

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is reflected in the emphasis on repurposing.

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Mixed-use in the survey responses.

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The survey shows that repurposing existing stock from 1
sectorto another. It's clearly on an upward trend, with 54%

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of respondents repurposing more assets in their portfolio
compared to

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previous years. Likewise, more than 3/4 expect to be700:13:56 --> 00:13:59:

repurposing
still more assets in five years time, again up from00:13:59 --> 00:14:01:

last year's survey.

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And as the chart here shows, for office and retail00:14:05 --> 00:14:09:

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assets, the two sectors facing the most obvious structural
challenges
repurposing to mixed-use real estate is the activity thatparticipants
expect to increase most over the next three to five

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years.

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As a survey makes clear, the motive is not just

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about dealing with the threat of obsolescence. Nearly 2/3 of

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respondents believe repurposing or retrofitting and existingbuilding is the

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most attractive way to acquire prime assets. That's a similar

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theme in many ways to the the flight to quality

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theme, which has been a frequent reference in theinterviews.
Next slide, please.

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As mentioned, new energy infrastructures top ranking reflects
a trend00:14:47 --> 00:14:51:

in which traditional real estate is looking towards sectors that

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occupy that overlapping space between energy transition,transport, logistics sectors

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and real estate. A once in a generation value shift

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from transport and energy value into real estate as I've

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heard it described. There's also a clear example of of

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the real estate sector starting to apply its core skills

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and capital to deliver products that deliver tangible benefits
froman ESG perspective and for over 90% of respondents.

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Running an environmentally and socially sustainablebusiness is the most

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important factor for a successful organization over the next
20
years. And in addition, just under 90% of respondents
highlighted
the importance of creating social impact alongside financial
return over

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the next 20 years.

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The chart shown here highlights that the ESG agenda,
climatechange and decarbonisation all feature in the top fiveexpected
drivers of change for real estate over the next 20

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8

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years, alongside technology and the changing demands ofcustomers.
Next slide, please.

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So to conclude, real estate parties have always been in

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a state of constant state of evolution and and how

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the property world fully and satisfactorily aligns future profits
witha wider social objective is is clearly still in transition

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with values already falling. The coming year could be a

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great buying opportunity for investors to enter into new
emerging
sectors, investing in sectors they're under allocated to or to

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embark on developing new transition strategies for fastchanging market.

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Right now, this is perhaps more theory than practice, and

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most interviews are are experiencing the sort of market
logjamthat occurs at all times of economic uncertainty, when buyers

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and sellers can't agree on the price of assets.

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The potential for distress has been a great topic of

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debate among both investors and lenders interviewed for thisyear'sreport, and the consensus view seems to be that the

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level of distress is unlikely to reach the proportions of

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the GFC because of those lower leverages, lower leveragelevels.
I set out in Chapter 7 of this year's report,

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which again, I'd urge you to read. The industry's move

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towards new products and a form of responsible capitalism
overthe next 20 years is driven by many factors, but

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above all by the climate crisis. It is the one

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trend that has only gained in prominence and relevancethroughout
emerging trends, Europe's 20 year history, connecting boththe past,

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the present and the future.

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And with that, I'll hand over to Simon for to

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introduce the the panel.

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Thanks, Gareth. Umm, that's a great summary of of once

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again, what is an excellent UI report. And good afternoon

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everybody. Welcome to the interactive panel session and thesessions
program to run for the next 40 minutes or so.

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So we'll look to finish up at about 1:30 UK
9

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time. My name's Simon Martin. I'm going to moderate the

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session today and joined today by some faces that will

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be very familiar to many of you, if not all

00:17:58 --> 00:18:01:

of you with me today. We've got Natalie Charles from00:18:01 --> 00:18:02:

BNP Asim, I'll.

00:18:02 --> 00:18:06:

Follow me from Berlin hip Yogan thank from Primordial and

00:18:06 --> 00:18:08:

Lisette is joining us for the panel as well.

00:18:10 --> 00:18:12:

If you could all switch your cameras on guys that

00:18:12 --> 00:18:15:

would be fantastic. I'd remind you all as audience members

00:18:15 --> 00:18:18:

that you can pose questions to the panel as we

00:18:18 --> 00:18:21:

proceed using the Q&A function and that the set highlighted

00:18:21 --> 00:18:23:

earlier on those will come into me and I'll try

00:18:23 --> 00:18:25:

and sell to them in to the debate as we

00:18:25 --> 00:18:28:

go along through the the various subjects we've got on

00:18:28 --> 00:18:29:

the on the Charter today.

00:18:30 --> 00:18:33:

I thought I'd kind of kick off by by asking

00:18:33 --> 00:18:35:

some posing some questions of my own.

00:18:37 --> 00:18:39:

You know, one of the things I was sort of

00:18:39 --> 00:18:42:

reflecting on as a consequence of sort of looking at

00:18:42 --> 00:18:45:

all the results of the report and reading through kind

00:18:45 --> 00:18:49:

of the findings was that, you know, the contrast between,

00:18:49 --> 00:18:52:

you know, when the survey was originally filled in back

00:18:52 --> 00:18:54:

in, I guess the late summer and and in early

00:18:54 --> 00:18:57:

September. And the world that we sit in today, you

00:18:57 --> 00:19:00:

know, there's been a lot of volatility and uncertainty in

00:19:00 --> 00:19:03:

Europe since the end of the summer break.

00:19:04 --> 00:19:06:

In the survey at the end of the summer, I

00:19:06 --> 00:19:10:
00:19:10 --> 00:19:13:

think 51% of the respondents thought they'd be investing
more
capital into the market in 2023. And I'm wondering if

00:19:13 --> 00:19:16:

if that's changed then have the events of the last

00:19:16 --> 00:19:19:

couple of months changed how you guys are panelists do

00:19:19 --> 00:19:22:

the investment opportunity. So I love all of your views

00:19:22 --> 00:19:24:

but I thought I'd start with Natalie, see if you

00:19:24 --> 00:19:27:

know if you could kick us off, have you shifted

00:19:27 --> 00:19:30:

your view of the investment opportunity and and what you'd

00:19:30 --> 00:19:33:

like to do in 2023 since the summer break and

00:19:33 --> 00:19:35:

it would be great to understand if you have how.

00:19:36 --> 00:19:37:

They might have changed that.

00:19:37 --> 00:19:41:

Thank you, Simon for starting with me and good afternoon,

00:19:41 --> 00:19:45:

everybody. The answer is simple. No, we have not shifted

00:19:45 --> 00:19:47:

because we were already.
1000:19:49 --> 00:19:53:
00:19:53 --> 00:19:57:

Very cautious with the idea that there are a lotof things we can't predict at all. So we just

00:19:57 --> 00:20:00:

need to be humble, to be agile, to work with

00:20:00 --> 00:20:04:

our sleeves and to work hard on the performance of

00:20:05 --> 00:20:09:

the assets we manage and the portfolio we manage in

00:20:09 --> 00:20:15:

general. Of course, the general environment is obviously
more pessimistic

00:20:15 --> 00:20:18:

today than it was two months ago, but.

00:20:20 --> 00:20:24:

In terms of mid to long term strategy, I don't

00:20:24 --> 00:20:27:

see a change. I see a change in the short

00:20:27 --> 00:20:29:

term but not in the mid to long term and

00:20:30 --> 00:20:33:

as we are mid to long term player this has.

00:20:33 --> 00:20:37:

No significant influence to our general strategy.

00:20:38 --> 00:20:41:

Thanks. I mean yergen have have you changed your view

00:20:41 --> 00:20:45:

was your were you similarly sort of pessimistic going into

00:20:45 --> 00:20:47:

the summer or or are you a little bit more

00:20:47 --> 00:20:48:

optimistic about 2023?

00:20:50 --> 00:20:54:

No, I, I, I would, I would actually, I'm close

00:20:54 --> 00:20:59:

to repeat what Natalie said because it applies to us

00:20:59 --> 00:21:03:

as well. But I'm not saying it again. I'm, I'm,

00:21:03 --> 00:21:08:

I'm certainly more more pessimistic for 2023. I would be

00:21:08 --> 00:21:14:
00:21:14 --> 00:21:19:

surprised to hear people being different. The environment is
as
it is. We are. We are clearly waiting for opportunities.

00:21:20 --> 00:21:24:

We have capital that allows us to take advantage of

00:21:24 --> 00:21:29:

opportunities. Right now the market is still in the process

00:21:29 --> 00:21:35:
00:21:35 --> 00:21:39:

of getting repriced. It's it's happening slowly actually too
slowlybut steadily and and we will, we will, we will

00:21:39 --> 00:21:42:

be there when we when we see the the right

00:21:42 --> 00:21:43:

environment.

00:21:45 --> 00:21:47:

Especially in terms of yields.

00:21:48 --> 00:21:51:

Right. And I mean, I think it'd be interesting I

00:21:51 --> 00:21:53:

think to to sort of contrast that with the way

00:21:53 --> 00:21:57:
00:21:57 --> 00:22:01:

in which the banking markets, looking at the current
environment,
have you guys changed the way that you're thinking about

00:22:01 --> 00:22:04:

risk appetite about what you're prepared to to lend into

00:22:04 --> 00:22:07:

or again are you stepping back being a little bit

00:22:07 --> 00:22:09:

more circumspect and being more patient?

00:22:11 --> 00:22:16:

Yeah, I think we haven't fundamentally changed our viewhow
we see the market, but we we do recalibrate risk

00:22:16 --> 00:22:19:

11

00:22:19 --> 00:22:20:
00:22:22 --> 00:22:25:

parameters.
And I think it is induced by by several factors.

00:22:26 --> 00:22:31:
00:22:31 --> 00:22:35:

One, for once the uncertainty as as everybody alreadymentioned,
the uncertainty also leads banks to be more cautious and

00:22:35 --> 00:22:40:

to see where where is the value discussion going. Secondly,

00:22:40 --> 00:22:45:
00:22:45 --> 00:22:49:

the value discussion will always also result into a
consumptionof risk weighted assets. So that mechanically will lead to

00:22:49 --> 00:22:52:

A to a decrease in appetite of of.

00:22:52 --> 00:22:56:

Of of lenders practically speaking. And all this will be

00:22:56 --> 00:23:00:

amplified also by an increasing importance of EG we'll come

00:23:00 --> 00:23:04:

together that later on I know but but ESG will

00:23:04 --> 00:23:07:

will be a factor in that discussion to to.

00:23:08 --> 00:23:12:

Whether not lenders will still be who have the same

00:23:12 --> 00:23:16:

appetite so in a in A to put it shortly

00:23:16 --> 00:23:21:

the risk appetite will of blenders will decrease will go

00:23:21 --> 00:23:26:

down and and thus lending or bank financing will become

00:23:26 --> 00:23:31:

more expensive that's my my view first talking for for

00:23:32 --> 00:23:36:

speaking for Biden hip we we are not in any

00:23:36 --> 00:23:37:

way concerned for.

00:23:37 --> 00:23:41:

2023, but we will be probably a bit more selective

00:23:41 --> 00:23:43:

than than before.

00:23:45 --> 00:23:47:

And selective in terms of the range of different things

00:23:47 --> 00:23:50:

you'll look at or just simply selective in terms of

00:23:50 --> 00:23:52:

the the pricing that you're you're willing to kind of

00:23:52 --> 00:23:53:

put on things?

00:23:54 --> 00:23:57:

No selective in in in the the, the, the the

00:23:58 --> 00:24:02:

risk that we will underwrite right there. So. So tactically

00:24:03 --> 00:24:07:

speaking probably we'll we'll we'll be doing a bit less

00:24:07 --> 00:24:13:
00:24:13 --> 00:24:17:

on the construction financing side practically speaking will be
westay as as a conservative as before on the retail

00:24:17 --> 00:24:21:

side we will be selective. It'll be a very nuanced

00:24:21 --> 00:24:24:

picture when it comes to offices.

00:24:24 --> 00:24:28:

It would be a.

00:24:28 --> 00:24:32:

Time when residential will be still be regarded as a

00:24:32 --> 00:24:36:

as a safe haven, so to speak, and after a

00:24:36 --> 00:24:39:

correction. Values are also logistics.

00:24:40 --> 00:24:42:

But basically if I may jump in.

00:24:43 --> 00:24:47:

So what you're saying is that banks will reduce capacity

00:24:47 --> 00:24:50:

or will have reduced capacity for lending?

00:24:51 --> 00:24:51:

Which?
12

00:24:52 --> 00:24:53:
00:24:53 --> 00:24:53:

Yeah.
As the good.

00:24:53 --> 00:24:56:

News for the good news for alternative lenders.

00:24:57 --> 00:25:00:

That that's true I think it is, I think it

00:25:00 --> 00:25:03:

is. I mean you know how to works when when

00:25:04 --> 00:25:07:

the macroeconomics go down the drain then we we have.

00:25:08 --> 00:25:12:

Downgrades in in ratings and that will lead up risk

00:25:12 --> 00:25:16:

weighted assets which will not be available for new business.

00:25:16 --> 00:25:19:

So yeah I I think the the the balance sheets

00:25:19 --> 00:25:23:

will be slightly diminished by by by the recession.

00:25:25 --> 00:25:27:

I mean so focusing just on that, I mean that

00:25:27 --> 00:25:30:

question is I think the alt lender community particularly are

00:25:30 --> 00:25:33:

going to an interesting idea, right. I mean I I

00:25:33 --> 00:25:36:

do people see there being significant momentum behindfundraising in

00:25:36 --> 00:25:39:

that sector because it you know clearly if there is

00:25:39 --> 00:25:42:

going to be an investment opportunity in that sector, an

00:25:42 --> 00:25:45:

opportunity to allocate capital that that is clearly an area

00:25:45 --> 00:25:48:

where you might start to see more fundraising activity, more

00:25:48 --> 00:25:51:

institutional appetite for allocating capital into that space.

00:25:52 --> 00:25:55:

It is. I mean, you just read, you just read

00:25:56 --> 00:25:59:

every day that somebody is raising the debt fund. KKR

00:25:59 --> 00:26:00:

is now.

00:26:01 --> 00:26:04:

Has announced to to start in Europe others as well

00:26:04 --> 00:26:08:

smaller ones I think it's and I don't know how

00:26:08 --> 00:26:12:

successful they are in fundraising account comment on that.
But
I think that they they clearly see the opportunity of

00:26:12 --> 00:26:16:
00:26:16 --> 00:26:21:
00:26:21 --> 00:26:25:

that potentially reduced capacity of banks as a potentiallybecauseit's not for certain but especially in conjunction with us

00:26:25 --> 00:26:29:

and with what Asim said which is the reduced appetite

00:26:29 --> 00:26:29:

because.

00:26:31 --> 00:26:35:

I think you can probably say generally banks will will

00:26:35 --> 00:26:40:

probably avoid more of the developments development
loans. So that's

00:26:40 --> 00:26:44:

a space where the alternative lenders and debt that funds

00:26:44 --> 00:26:50:
00:26:50 --> 00:26:52:

clearly can play and including their potentially their yieldrequirements
they have on that on that type.

00:26:52 --> 00:26:53:

Of product.

00:26:54 --> 00:26:55:

Absolutely.

00:26:55 --> 00:26:57:

You'd be talking about things like, you know, the.
13

00:26:57 --> 00:27:01:

Obviously development. Development, but you're also reallytalking about high

00:27:01 --> 00:27:04:

LTV lending I guess as well in that space. You're

00:27:04 --> 00:27:07:

also potentially talking about you know, financing transition
assets where

00:27:07 --> 00:27:10:

there are big research costs or big CapEx requirements.

00:27:11 --> 00:27:14:

I think you know I think the whether it's big

00:27:14 --> 00:27:17:

LTV I'm not sure if if if you need to

00:27:18 --> 00:27:21:

have a high LTV you can probably be successful as

00:27:22 --> 00:27:24:

a as a debt lender if you if you go

00:27:24 --> 00:27:28:

slightly above what the the traditional.

00:27:28 --> 00:27:31:

Things are doing which is not necessarily high LTV, but

00:27:31 --> 00:27:35:

I think there are a lot of opportunities that may

00:27:35 --> 00:27:38:

come up in terms of refinancing recapitalization.

00:27:39 --> 00:27:43:

Don't forget you know a lot of loans that have

00:27:43 --> 00:27:46:

been made five years ago have been made at at

00:27:46 --> 00:27:50:

basically a zero rate plus margin and now we have

00:27:50 --> 00:27:54:

a three or three something rate plus margin. So there

00:27:54 --> 00:27:57:

will be triggers in terms of LTV's and and debt

00:27:57 --> 00:28:01:

service coverage that could be you know painful for for

00:28:02 --> 00:28:04:

some and an opportunity for others.

00:28:06 --> 00:28:09:

Mayor, may I may add maybe just to complete what

00:28:09 --> 00:28:12:

I fully agree with argan, LTV's will not go up

00:28:12 --> 00:28:15:

in a in a time where we haven't found the

00:28:15 --> 00:28:19:

right value yet. So I think that's maybe for 2024

00:28:19 --> 00:28:23:

when maybe somebody's picking up the Delta V thing again.

00:28:23 --> 00:28:27:

But for the time being it's about what you're going

00:28:27 --> 00:28:30:

to say it's about assets and that there are a

00:28:30 --> 00:28:34:

bit alternative such as data Centers for example that that

00:28:35 --> 00:28:36:

banks will maybe.

00:28:36 --> 00:28:39:

Not have such a great appetite to to finance.

00:28:40 --> 00:28:41:

Is that you had a comment I think.

00:28:42 --> 00:28:46:

Yes, similar I think the deployment that you can raise,

00:28:46 --> 00:28:49:

maybe you can raise the money for that funds, but

00:28:49 --> 00:28:53:

deploying it is is subject to what you said earlier

00:28:53 --> 00:28:57:

on the repricing. No, because the costs will go up

00:28:57 --> 00:29:01:
00:29:01 --> 00:29:04:

probably for everyone and the financing cost and the
independentof the of the the lending source, but you still

00:29:04 --> 00:29:07:

need to be able to close the deal and if

00:29:07 --> 00:29:09:

the market hasn't repriced.

00:29:10 --> 00:29:13:

And the deal won't go through, no. And that's probably

00:29:13 --> 00:29:16:

the the biggest point at the moment.
1400:29:18 --> 00:29:20:

Absolutely. So I mean we've talked a lot about the

00:29:21 --> 00:29:23:

market, market conditions a little ohh a little bit at

00:29:23 --> 00:29:26:

least we could probably spend the remainder of the next

00:29:26 --> 00:29:28:

20 to 30 minutes talking about them. But there was

00:29:28 --> 00:29:31:

a couple of other things that we thought we should

00:29:31 --> 00:29:33:

pick up on in terms of the conversation and and

00:29:33 --> 00:29:35:

the report. The the second, the the sort of second

00:29:35 --> 00:29:37:

area that I wanted to just sort of touch on

00:29:37 --> 00:29:40:

very briefly was just to sort of ask you guys

00:29:40 --> 00:29:42:
00:29:43 --> 00:29:45:

whether or not you know, you thought that people's
strategies
would evolve as a consequence of the market changing. So

00:29:45 --> 00:29:46:

for a long time you know?

00:29:47 --> 00:29:49:

If you look back at the prior reports and also

00:29:49 --> 00:29:51:

you sort of talk to people in the marketplace and

00:29:51 --> 00:29:54:

people have had a really strong preference for just a

00:29:54 --> 00:29:57:

handful of you know thematic strategies. I mean I've seen

00:29:57 --> 00:29:59:

asset highlighted it, residential has been a kind of a

00:29:59 --> 00:30:02:

a big thing with the logistics markets have been a

00:30:02 --> 00:30:05:

big thing for people to focus their effort and energy

00:30:05 --> 00:30:07:

on. And I was wondering if people felt that you

00:30:07 --> 00:30:10:

know the strategic biases that they had been applying to

00:30:10 --> 00:30:12:

last two or three years. So it's really big semantic

00:30:12 --> 00:30:15:

bets we're going to slip in the next 24 months

00:30:15 --> 00:30:17:

and we're going to go back to really trying to

00:30:17 --> 00:30:17:

find.

00:30:17 --> 00:30:20:

Great deals or distressed sellers, are we talking about a

00:30:20 --> 00:30:23:

different market environment where we we don't all have to

00:30:23 --> 00:30:26:

be completely somatic or or are we all going to

00:30:26 --> 00:30:29:

keep just smashing away at those, those keys thematic ideas

00:30:29 --> 00:30:31:

and keep doing all the same things for the next

00:30:31 --> 00:30:33:

5 years? I guess I could ask that to anyone

00:30:33 --> 00:30:36:

really, maybe start with yoga and then perhaps, Natalie, if

00:30:36 --> 00:30:39:

you could give us your view as well, that would

00:30:39 --> 00:30:40:

be really great.

00:30:41 --> 00:30:42:

But I do believe.

00:30:44 --> 00:30:47:

Yes, I do believe that there has been some shift

00:30:47 --> 00:30:50:

in, in terms of asset classes, but you just mentioned

00:30:50 --> 00:30:54:

logistics for example, which definitely in the last 3-4 years

00:30:54 --> 00:30:57:

was more or less replacing the Golden Age of retail00:30:58 --> 00:31:00:

that was taking place 5 to 10 years ago. But

00:31:00 --> 00:31:03:

when you look in detail at what were the volumes
15

00:31:03 --> 00:31:07:
00:31:07 --> 00:31:10:

in commercial real estate in general, you can see that
offices which were definitely not at the heart of the

00:31:10 --> 00:31:14:

conversation in the recent years, we're still more or less.

00:31:14 --> 00:31:18:

50% of the volumes that were transacted. So I mean

00:31:18 --> 00:31:23:

I think we need to make differences between what is.

00:31:24 --> 00:31:28:

Popular in term of conversation and this was also the

00:31:28 --> 00:31:32:

asset classes that were were shown in the study, for

00:31:32 --> 00:31:36:

example like life science or or some other elements which

00:31:36 --> 00:31:40:

were highly ranked in the European 20 real estate study.

00:31:40 --> 00:31:42:

But what are the real volumes?

00:31:43 --> 00:31:46:

Overall in Europe and finally, yes, there has been a

00:31:47 --> 00:31:50:

shift between retail and logistics. This one is true in

00:31:50 --> 00:31:53:

the last few years. But life science for example remains

00:31:53 --> 00:31:56:

the sector where a lot of people have said I

00:31:56 --> 00:31:59:

want to go in this sector because I believe in

00:31:59 --> 00:32:03:

it and we're practically speaking the market has not really

00:32:03 --> 00:32:06:

been there. There was, there were no products, it was

00:32:06 --> 00:32:09:

not easy except maybe a bit in the UK, but

00:32:09 --> 00:32:12:

overall in the euro zone very, very few transactions and

00:32:12 --> 00:32:14:

then if you look at.

00:32:14 --> 00:32:19:

Other alternative sectors, for example, you've seen asignificant increase

00:32:19 --> 00:32:23:

into the healthcare sector, which is for example, one of

00:32:23 --> 00:32:27:

our favorites at the Imperium for an obvious reason, which

00:32:27 --> 00:32:31:

is that it is related to demographics, which doesn't depend

00:32:31 --> 00:32:35:
00:32:35 --> 00:32:38:

on macro trends demographic. The demography of the next
20
years has already been there for 60 years in this

00:32:38 --> 00:32:42:

area. So it's quite solid and also easy to forecast.

00:32:43 --> 00:32:47:

But despite the increase of this sector in the last

00:32:47 --> 00:32:50:

two or three years, it's still less than 10% of

00:32:50 --> 00:32:51:

the overall market.

00:32:52 --> 00:32:56:

So I think it's very important to pay attention to

00:32:56 --> 00:33:00:

the reality of numbers and not only to talk sector

00:33:00 --> 00:33:00:

by sector.

00:33:02 --> 00:33:05:

Yogen, I mean obviously you guys have got sector biases

00:33:05 --> 00:33:07:

in what you do, but are you in the same

00:33:07 --> 00:33:09:

place, is it, is it more about the reality of

00:33:09 --> 00:33:11:

the market opportunity and less about the the sort of

00:33:11 --> 00:33:14:

sector schematics for the for the foreseeable future?

00:33:15 --> 00:33:18:

Yeah, I mean we, we we continue to focus on

00:33:18 --> 00:33:22:

thematic teams. We are conviction based. We are clearlylooking16

00:33:22 --> 00:33:26:

at you know demographic and EG topics in real state

00:33:26 --> 00:33:30:

that doesn't reduce things to one or two asset class.

00:33:30 --> 00:33:34:

But you know Healthcare is vicodins coincidence. Also one of

00:33:34 --> 00:33:37:

our favorite asset classes which by the way wasn't an

00:33:37 --> 00:33:41:

asset class two or three years ago and this is00:33:41 --> 00:33:44:

also important to say that you know that the shift

00:33:44 --> 00:33:45:

of capital.

00:33:46 --> 00:33:49:

A little bit away from office into other asset classes

00:33:49 --> 00:33:54:

00:34:03 --> 00:34:04:

have suddenly given the other asset classes more more
importanceand have become more institutional. Having said that, you
know,like Natalie said, doesn't mean that there's suddenly moreproduct
and it has led to.

00:34:05 --> 00:34:09:

To to shift and keep rates and so now on

00:34:09 --> 00:34:12:

the other side you know I'm, I'm always.

00:34:13 --> 00:34:18:
00:34:18 --> 00:34:19:

Taking these ahead of opportunity of opportunities, there willbea lot of.

00:34:19 --> 00:34:24:

People out there, the more opportunistic and more short term

00:34:24 --> 00:34:28:

investors that will be looking for distress and yields just

00:34:28 --> 00:34:32:
00:34:32 --> 00:34:36:

without any specific teams, just the opportunity to makemoney
and this has always been the case in crisis and

00:34:36 --> 00:34:39:

it will be again the case is this this time

00:34:39 --> 00:34:42:

and overall, you know overall for me the clear point

00:34:43 --> 00:34:46:

is that whoever has capital will be on the winning

00:34:46 --> 00:34:46:

side.

00:34:48 --> 00:34:49:

Agreed. You're gonna?

00:34:50 --> 00:34:53:

That's a great point actually and I wanna come, I

00:34:53 --> 00:34:55:

wanna come on to capital raising because I think it's

00:34:56 --> 00:34:59:
00:34:59 --> 00:35:01:

an incredibly important one. And actually I'm gonna, I'm
gonna
kind of go to Lisette here and put her on

00:35:01 --> 00:35:03:

the spot a little bit because you've just been in

00:35:03 --> 00:35:06:

the US, right, you literally just walked off the plane.

00:35:06 --> 00:35:08:

You know, we all obviously looked a little bit to

00:35:08 --> 00:35:11:

the US leadership and kind of when capital flows are

00:35:11 --> 00:35:13:

going to start moving over here on the opportunistic side,

00:35:14 --> 00:35:15:

what what is the US view?

00:35:15 --> 00:35:16:

Of.

00:35:16 --> 00:35:19:

Europe right now, one and two, do you think that

00:33:54 --> 00:33:58:
00:33:58 --> 00:34:03:

17

00:35:19 --> 00:35:21:
00:35:21 --> 00:35:23:

is additive to capture?
Do you think that there is going to be any

00:35:23 --> 00:35:25:

interest from the US and coming over to Europe to

00:35:25 --> 00:35:28:

try and take advantage of some of you know what

00:35:28 --> 00:35:30:

the guys have been talking about in terms of potential

00:35:30 --> 00:35:33:

dislocation or changes in the market that might occur over

00:35:33 --> 00:35:34:

the next year or so?

00:35:36 --> 00:35:39:

I think for the short term, the US feels there's

00:35:40 --> 00:35:43:

more opportunities in the US than in Europe. Europe feels

00:35:43 --> 00:35:47:
00:35:48 --> 00:35:48:

very complicated at the moment with obviously the war
energyprices.

00:35:49 --> 00:35:52:

And if you well, what we know from tradition, slow

00:35:52 --> 00:35:53:

reactions, no.

00:35:55 --> 00:36:00:

He has responded much slower to very high inflation.

00:36:02 --> 00:36:05:

I think that's already what we heard in the survey

00:36:05 --> 00:36:08:

as well and that's also the the view still that.

00:36:09 --> 00:36:12:

For the time being, there's not a lot to do

00:36:12 --> 00:36:16:

and what we know also more generally is Americans tend

00:36:16 --> 00:36:21:
00:36:21 --> 00:36:24:

to come more for the more opportunistic value add
opportunities
and while they may arise, they're not there yet and

00:36:24 --> 00:36:27:

we already mentioned that before so.

00:36:28 --> 00:36:30:

Knowing Americans, they will always be looking.

00:36:31 --> 00:36:35:

And and of course not the currency to forget which

00:36:35 --> 00:36:39:

is highly volatile at the moment and moving again in

00:36:39 --> 00:36:43:

the wrong direction only only today. So there's not a

00:36:43 --> 00:36:47:

lot to do for Americans in Europe at the moment

00:36:47 --> 00:36:51:

and I think they see they are concerned too. So

00:36:51 --> 00:36:54:

the general picture about the Americas is.

00:36:55 --> 00:36:59:

Probably not as as extreme and outspoken of what we

00:36:59 --> 00:37:01:

see here in terms of concerns.

00:37:02 --> 00:37:05:

So, but I think for now there there remain focus

00:37:05 --> 00:37:09:

on their home markets seeking the opportunities there.

00:37:11 --> 00:37:13:

I think it's what's interesting is obviously with treasury yields

00:37:14 --> 00:37:14:

as high as they are.

00:37:16 --> 00:37:18:

It makes it pretty hard to justify coming away from00:37:18 --> 00:37:21:

your home market. I guess would probably be the the

00:37:21 --> 00:37:23:

response I've had from a number of our clients from00:37:23 --> 00:37:23:

the US side.

00:37:27 --> 00:37:29:

OK. So what I wanted to do also was just

00:37:29 --> 00:37:31:

to rotate a little bit, we mentioned ESG a little

00:37:31 --> 00:37:33:

bit earlier on and and I think I might just18

00:37:34 --> 00:37:36:

stay with you lissette just on this just for a

00:37:36 --> 00:37:38:

second which is the's right up there is a major

00:37:38 --> 00:37:41:

consideration for most of the people clearly in this survey,

00:37:41 --> 00:37:44:

lots of focus on office. I I particularly liked one

00:37:44 --> 00:37:47:

of the quotes in the report which by 1 participant

00:37:47 --> 00:37:50:

which referenced the idea that his office portfolio which is

00:37:50 --> 00:37:53:

residential development pipeline. I guess again I waswondering in

00:37:53 --> 00:37:56:

in all the conversations that you're having with investors.

00:37:57 --> 00:38:00:

You know, given what we've seen in energy prices, is

00:38:00 --> 00:38:04:

there any sense that some of that energy efficient efficiency

00:38:04 --> 00:38:07:

push might be blunted by the reality of a more

00:38:08 --> 00:38:12:

challenging market around the the concerns over the supplyofcapital it changes in risk appetite?

00:38:12 --> 00:38:14:
00:38:15 --> 00:38:18:
00:38:18 --> 00:38:21:
00:38:21 --> 00:38:25:

You know, particularly going into a tougher market, arepeoplestill fully wedded to the idea of driving through that

00:38:25 --> 00:38:26:

energy efficiency approach in their portfolios? Do you see
anysigns of wavering at all?

00:38:28 --> 00:38:31:

Well, not not on the verbal side. So if you

00:38:31 --> 00:38:34:

talk to people, there's no, no, no, we say we

00:38:34 --> 00:38:35:

remain Escobar.

00:38:36 --> 00:38:40:

Committed to ESD as we were before, but if you

00:38:40 --> 00:38:43:

then kind of try to dig a bit deeper and

00:38:43 --> 00:38:48:
00:38:48 --> 00:38:49:

talk about construction costs being very high financing, we
already
spoke about it.

00:38:50 --> 00:38:54:

How do you see it working in practice um construction

00:38:54 --> 00:38:58:

companies that we still hear not willing to fix a

00:38:58 --> 00:39:02:

price. So basically you're writing a blank check to making

00:39:02 --> 00:39:07:
00:39:07 --> 00:39:11:

the regenerate during the regeneration and the upgrades andinin a very uncertain time that's pretty hard also if

00:39:11 --> 00:39:15:

you have a refinancing coming up maybe in the next

00:39:15 --> 00:39:18:

year or two and may need equity before for our

00:39:18 --> 00:39:20:

LTV breach if your value.

00:39:20 --> 00:39:24:

Goes down. So I think in practice it's hard and

00:39:24 --> 00:39:29:

that's what we hear the the commitment is there, but

00:39:29 --> 00:39:33:

what we've heard is it may slow down within a

00:39:33 --> 00:39:34:

year or two.

00:39:35 --> 00:39:39:

If to make those regeneration interestingly what we didn't
19

00:39:39 --> 00:39:43:

hear
about and what I think again we did most of

00:39:43 --> 00:39:44:

the work over summer.

00:39:45 --> 00:39:51:
00:39:51 --> 00:39:56:

And what we've seen since slightly appearing not very
explicitly
yet is, oh wait a minute, that tenant faces hugely

00:39:56 --> 00:40:01:

increasing energy bills as well and more and more starts

00:40:01 --> 00:40:04:

to look at total occupancy cost, so.

00:40:05 --> 00:40:09:

What is not clear yet how one will outweigh the

00:40:09 --> 00:40:13:

other. If your contract is about to end in the

00:40:13 --> 00:40:16:

next year or two, you will really be probably be

00:40:16 --> 00:40:21:

forced to do anything even to keep your rental income.

00:40:21 --> 00:40:24:

So, and I'm not sure at the time we did

00:40:24 --> 00:40:29:
00:40:29 --> 00:40:33:

the work that was already completely featured into thethinking
and I think that starts to come through. We were

00:40:33 --> 00:40:35:

running a project around.

00:40:35 --> 00:40:40:

Be change, decarbonization of real estate have extensively
spoken with

00:40:40 --> 00:40:44:

occupiers over the last few months and that is really

00:40:44 --> 00:40:47:

coming through, so maybe not even from the.

00:40:49 --> 00:40:53:

Energy efficiency, we are alert a lot about attractiveness to

00:40:53 --> 00:40:56:

talent where tenants want to move. Tenants are in a

00:40:56 --> 00:40:59:

tough spot too, of course at the moment for their

00:40:59 --> 00:41:03:

operational business, but even for cost reduction, they will be

00:41:03 --> 00:41:05:

looking at these buildings.

00:41:05 --> 00:41:07:

And this is and this is, I mean this goes

00:41:07 --> 00:41:09:

to one of the actually I've just had one of

00:41:09 --> 00:41:11:

the questions come through which is about you know, it's

00:41:11 --> 00:41:13:

actually going to be quite a challenging time for tenants

00:41:13 --> 00:41:15:

because a lot of them are getting index rents, right,

00:41:15 --> 00:41:16:

so they're facing.

00:41:17 --> 00:41:20:

Rising rental costs at the same time they're they're facing

00:41:20 --> 00:41:23:

rising energy bills and on all of that squeezes margins

00:41:23 --> 00:41:27:

pretty aggressively. So I think yeah your points your points

00:41:27 --> 00:41:30:

well made it. It isn't perhaps wasn't completely in the

00:41:30 --> 00:41:33:

survey when the survey was conducted but I I can't

00:41:33 --> 00:41:36:

believe that in by the beginning of 2023 everybody won't

00:41:36 --> 00:41:39:

be dealing with it this sort of twin pressure of

00:41:39 --> 00:41:42:

of rising rental costs and also you know releasing of

00:41:42 --> 00:41:43:

energy bills.

00:41:44 --> 00:41:47:

Yeah, but maybe may I just had a remark. I

00:41:48 --> 00:41:52:

think I, I, I, I understood the, I understand the20

00:41:52 --> 00:41:56:

pressure that the investors are under these days, but ESG

00:41:57 --> 00:42:01:

is also about protecting your capital values, right. So you

00:42:02 --> 00:42:05:

can either prepare for a LTV breach or you can

00:42:05 --> 00:42:11:
00:42:11 --> 00:42:13:

buy investing into the energetic capacities of your buildingcanalso avoid the the LTV bridge.

00:42:14 --> 00:42:16:

That's, that's beautifully put us in.

00:42:18 --> 00:42:21:

I think we're all very conscious of the costs of

00:42:21 --> 00:42:24:

not investing in our assets and therefore the implications for

00:42:24 --> 00:42:26:

our health B's. But I think it's well put. I

00:42:26 --> 00:42:29:

mean ultimately I think that part of this also goes

00:42:29 --> 00:42:31:

to the idea of how to cap rate set in

00:42:31 --> 00:42:33:

the next five years that there is clearly a lot

00:42:33 --> 00:42:36:

of pressure on cap rates associated with rising interest rates.

00:42:36 --> 00:42:39:

I would I would proffer that perhaps some of the

00:42:39 --> 00:42:41:

assets that will be most resilient in those will be

00:42:41 --> 00:42:44:

the assets that have been most invested in for many

00:42:44 --> 00:42:45:

HG standpoint.

00:42:46 --> 00:42:47:

Yeah. And I think we will.

00:42:47 --> 00:42:52:

We will, we will see lenders making a strong point

00:42:52 --> 00:42:56:

in in in their selection of of preferring ESG compliant

00:42:56 --> 00:42:57:

assets.

00:42:59 --> 00:43:00:

Actually, sorry, you had a comment there.

00:43:00 --> 00:43:03:

Yeah, and I completely agree with what just was just

00:43:03 --> 00:43:04:

said by SM.

00:43:06 --> 00:43:09:
00:43:09 --> 00:43:12:

Looking precisely at this question for new investments isabsolutely
mandatory now, and not only because of regulations.

00:43:13 --> 00:43:17:

On the other hand, I do believe that high energy

00:43:17 --> 00:43:21:

prices will accelerate energy savings. I mean, it is a

00:43:21 --> 00:43:25:

strong signal. It is super painful at the moment. It's

00:43:25 --> 00:43:30:

painful for investors, it's painful for tenants. Nobody has a

00:43:30 --> 00:43:34:

perfect or simple solution. So it requires a lot of

00:43:34 --> 00:43:38:

work, but it is a strong signal that will differentiate

00:43:38 --> 00:43:40:

good assets from average assets.

00:43:42 --> 00:43:45:

And and definitely the protection of value for investors is

00:43:46 --> 00:43:48:

absolutely key. So we are going to do more EG

00:43:48 --> 00:43:52:

in my view not only because of regulation or because

00:43:52 --> 00:43:55:
00:43:55 --> 00:43:59:

of convictions, but because of good common sense having
theright assets that will get the right tenants that can

00:43:59 --> 00:44:02:

afford the right trends and then do our job, protect

00:44:02 --> 00:44:03:

our investors value.
21

00:44:04 --> 00:44:08:

And that's this, this just relates to another question that

00:44:08 --> 00:44:11:

just come in, but do you see yourself therefore really

00:44:11 --> 00:44:14:

pushing on the Green lease side of things, you know,

00:44:14 --> 00:44:16:

do you feel that you need to enshrine that also

00:44:17 --> 00:44:19:

in the tenants obligations to you as a landlord?

00:44:21 --> 00:44:25:

I mean the price signal will push the tenant to

00:44:25 --> 00:44:28:

look at those question whatever its list says.

00:44:29 --> 00:44:33:

At a certain point it's not about having more sophisticated

00:44:33 --> 00:44:37:

contracts. It's about again what I call good common sense,

00:44:37 --> 00:44:40:

which is just looking at your bills, you're looking at

00:44:41 --> 00:44:44:

your your cost and making choices which are not only

00:44:44 --> 00:44:47:

on a number of other criteria, but that on boards

00:44:47 --> 00:44:50:

this question of EG in general the one of energy

00:44:51 --> 00:44:54:

price in particular, the right of the, the one of

00:44:54 --> 00:44:57:

location the, the, the one of as well the development

00:44:57 --> 00:45:00:

around the S question and particularly.

00:45:00 --> 00:45:04:

Your place within the community and the territory you are

00:45:04 --> 00:45:08:

getting into. So yeah, I think the the more it

00:45:08 --> 00:45:11:

becomes sophisticated the more at the same time we need

00:45:11 --> 00:45:15:

to be super pragmatic in our relationship with students. And

00:45:16 --> 00:45:19:

I don't think it's about Greenlease's it's, it's about.

00:45:20 --> 00:45:23:

I mean fair and balanced business relationship.

00:45:24 --> 00:45:27:

I think just one question on, just one last one

00:45:27 --> 00:45:30:

on this CSG seems, I think it's an interesting one

00:45:30 --> 00:45:33:

is do you guys see yourselves also putting in covenants

00:45:33 --> 00:45:36:

and clauses associated with margin step downs for the right

00:45:36 --> 00:45:39:

kind of ESG behaviour or is that just a sort

00:45:39 --> 00:45:41:

of a step too far for you guys is, but

00:45:41 --> 00:45:44:

are you trying to actively encourage it in the economics

00:45:44 --> 00:45:46:

that you're placing into loans?

00:45:46 --> 00:45:51:

Absolutely. We, we, we, we introduced our, our the family

00:45:51 --> 00:45:53:

of green and social loans.

00:45:54 --> 00:45:58:

And and that implies that there's a penalty mechanism if

00:45:58 --> 00:46:02:

you don't comply with the with the greener anymore. So

00:46:02 --> 00:46:05:

yeah, yes, yes we do and we we've done that

00:46:06 --> 00:46:09:

on the refinancing side for a while. We were the

00:46:09 --> 00:46:13:

first lender to to issue a sustainability link link bond

00:46:13 --> 00:46:16:

and our green bonds we issued starting to to 16.

00:46:17 --> 00:46:20:

So yeah, yes, yes we we are going down this

00:46:20 --> 00:46:21:

in in this direction.

00:46:22 --> 00:46:22:

Very.

00:46:22 --> 00:46:25:

Clearly not. I can see you nodding there. You you
22

00:46:25 --> 00:46:27:
00:46:27 --> 00:46:29:

seem to be in complete agreement that it was there
a comment there or is it just complete agreement?

00:46:32 --> 00:46:33:

My side clear agreement.

00:46:34 --> 00:46:37:

No, I was, I was I was nodding and smiling

00:46:37 --> 00:46:40:

because I don't. I think 18 months ago there was

00:46:40 --> 00:46:43:

the other way around you gotta you gotta premium when

00:46:43 --> 00:46:47:

you complied with some some SG measures now you get

00:46:47 --> 00:46:50:

you you you you you getting you getting a penalty

00:46:50 --> 00:46:53:

and it's right you know it's it's like it's like

00:46:53 --> 00:46:55:

educating children you.

00:46:55 --> 00:46:57:

Know you.

00:46:57 --> 00:46:58:

Have to use both sides.

00:46:59 --> 00:47:00:

How old are your children?

00:47:01 --> 00:47:04:

Yeah, my old enough to say that you.

00:47:04 --> 00:47:07:

Know adults so before because we've got about 5 minutes

00:47:07 --> 00:47:09:

left, I just wanted to very quickly talk a little

00:47:09 --> 00:47:12:

bit about cities. And I think it was interesting just

00:47:12 --> 00:47:15:

to note in the in the cities analysis, some of

00:47:15 --> 00:47:18:

the German cities who sort of dropped a little bit

00:47:18 --> 00:47:21:

down the the hierarchy, but they were safe havens at

00:47:21 --> 00:47:24:
00:47:24 --> 00:47:27:

a German cities no longer safe havens of somethingchangedin the marketplace that we should be thinking about.

00:47:28 --> 00:47:32:

Well, first of all, to to put this in perspective,

00:47:32 --> 00:47:35:

I'm based in Paris. I run a European platform and

00:47:35 --> 00:47:38:

I happen to, I happen to be German, so I'm

00:47:38 --> 00:47:41:

not defending Germany, but I think we have to be.

00:47:41 --> 00:47:45:

First of all, Berlin has lost one place, Hamburg and

00:47:45 --> 00:47:49:

Munich haven't lost any place, so they remain stable. Only

00:47:49 --> 00:47:52:

Frankfurt has lost three places, but all four are still

00:47:53 --> 00:47:56:

under the in the top eight. So that's still, I

00:47:56 --> 00:47:57:

would say, not bad.

00:47:58 --> 00:48:02:

But it is clear that the high dependency on, on,

00:48:02 --> 00:48:06:

on, on, on Russia for energy and as a result

00:48:06 --> 00:48:10:

and high energy cost and the prospective for difficult winter00:48:10 --> 00:48:15:

and a relatively grim German economy sentiment hascertainly led

00:48:15 --> 00:48:19:

that impact on on the ranking by all the the

00:48:19 --> 00:48:23:

people who participated in this, in this, in this session.

00:48:24 --> 00:48:29:
00:48:29 --> 00:48:33:

Nevertheless you know Germany has always had strong
fundamentals.
And here we're talking about cities and not about Germany.

00:48:33 --> 00:48:37:

You know, unlike other countries, you know, Paris is very23

00:48:37 --> 00:48:42:

heavy, France, Germany has seven markets, significant realestate markets.

00:48:43 --> 00:48:46:

So you have to look at the fundamentals and the

00:48:46 --> 00:48:50:

resilience of those cities and in my view there's still

00:48:50 --> 00:48:51:

strong.

00:48:51 --> 00:48:56:

Berlin has it's, it's large, Munich has a super strong

00:48:56 --> 00:48:59:

economy and and Hamburg as well. So I I think

00:48:59 --> 00:49:04:

that the for me I'm not concerned about the midterm

00:49:04 --> 00:49:05:

outlook of Germany.

00:49:07 --> 00:49:10:

Now I think on the short-term basis we will see

00:49:10 --> 00:49:14:

the same thing then every everywhere else. We will see

00:49:14 --> 00:49:18:

some distress, some opportunities, but it's still, you knowwhether
you call it safe haven or interesting markets, for me

00:49:18 --> 00:49:22:
00:49:22 --> 00:49:27:
00:49:27 --> 00:49:29:

it's really more part of interesting markets because safe
nothing
is safe in real estate anyhow.

00:49:31 --> 00:49:34:

I'm I'm hesitant to ask you because it you're Berlin

00:49:34 --> 00:49:36:

hit but I'm gonna ask you the same question is

00:49:36 --> 00:49:38:

do you guys see that see the do you see

00:49:38 --> 00:49:41:

the the you know the same pan in Germany that

00:49:41 --> 00:49:43:

that that that yogurt laid out.

00:49:43 --> 00:49:44:

Yeah.

00:49:44 --> 00:49:46:

Yeah, I I obviously I will hold up the the

00:49:46 --> 00:49:49:

flag from Berlin and then then say Berlin is a

00:49:49 --> 00:49:52:

great city and great place to invest but we we

00:49:52 --> 00:49:55:

obviously also investing in in in other places. But I

00:49:55 --> 00:49:58:

I would fully agree with Yogins to I don't want

00:49:58 --> 00:50:00:

to repeat what you're going to say.

00:50:01 --> 00:50:03:

Right and and one thing before we just sort of

00:50:03 --> 00:50:06:

move off cities. The other thing I was just going

00:50:06 --> 00:50:08:

to highlight and they said maybe if I come to

00:50:08 --> 00:50:10:

you and Natalie as well on on this one is

00:50:10 --> 00:50:13:

there's a couple of second tier cities that people would

00:50:13 --> 00:50:16:

historically have thought of as being kind of you know

00:50:16 --> 00:50:19:
00:50:19 --> 00:50:21:

obesity perhaps in a Lisburn jumps up the hierarchy.
Copenhagen
has done well, Leon has shown up you know as

00:50:21 --> 00:50:24:

a as an improver. Anything particularly that you think is

00:50:24 --> 00:50:26:

driving that or or is it you know is it,

00:50:26 --> 00:50:28:

is it population, is it you know the the the

00:50:28 --> 00:50:32:

shifts that we've seen with working practices is there
something.
24

00:50:32 --> 00:50:34:
00:50:35 --> 00:50:39:

Knowing that you guys would identify as being informed.
I believe that the first reason why those markets was

00:50:39 --> 00:50:43:

more attractive is that the returns were still higher at

00:50:43 --> 00:50:46:

the time of very low yields than the core cities.

00:50:46 --> 00:50:51:
00:50:51 --> 00:50:55:

So offering opportunities and then some of those markets
reallyexpanded with more, more liquidity and more depth than they

00:50:55 --> 00:50:58:

used to have 10 or 20 years ago. It will

00:50:58 --> 00:51:02:

be interesting to see if this remains in the next

00:51:02 --> 00:51:04:

three years or if it's vanishes a bit.

00:51:05 --> 00:51:09:

With people being a little more cautious and coming back

00:51:09 --> 00:51:12:

to what I would call call global cities, my conviction

00:51:13 --> 00:51:16:

is that this should remain, but we don't know, so

00:51:16 --> 00:51:17:

we'll see.

00:51:18 --> 00:51:22:

I also think it resembles a trend we've already seen

00:51:22 --> 00:51:25:

for a while, but which two seems to kind of

00:51:25 --> 00:51:29:

scale up and it's more focused on livability and EST

00:51:29 --> 00:51:33:
00:51:33 --> 00:51:37:

broader resilience I would say. And Copenhagen probably isais a clear example of that where we've already seen

00:51:37 --> 00:51:41:

international investors go in the last few years, but really

00:51:41 --> 00:51:44:

came out really well from the pandemic as one of

00:51:44 --> 00:51:48:

the few probably who managed it really well and.

00:51:48 --> 00:51:53:

With the whole net zero strategy they've set for 2025,

00:51:53 --> 00:51:57:

it has a very clear focus on livability and investors

00:51:57 --> 00:52:00:

more and more recognize that.

00:52:01 --> 00:52:05:

Fantastic. Thank you. Listen, I I think I'm, I'm running

00:52:05 --> 00:52:07:

rapidly out of time. So I've got, I've got one

00:52:07 --> 00:52:10:

last question that before we we close up today and

00:52:10 --> 00:52:12:

we we go to the kind of final poll and

00:52:12 --> 00:52:16:

it's sort of the $1,000,000 question from my standpoint and

00:52:16 --> 00:52:19:

let's just assume for a second that interest rates and

00:52:19 --> 00:52:22:

inflation stay a bit elevated for the next few years.

00:52:23 --> 00:52:26:

So we're in an environment where the European swap rate

00:52:26 --> 00:52:28:

stays at somewhere close to 3%.

00:52:29 --> 00:52:31:

So five years tops at 3%?

00:52:32 --> 00:52:36:

I'm wondering what in that environment you guys think the,00:52:36 --> 00:52:40:

ah, truly core, really good quality core, high quality, free,

00:52:41 --> 00:52:41:

certified.

00:52:42 --> 00:52:46:

Great asset trades for in that environment what happens to

00:52:46 --> 00:52:49:

pricing if rates get stuck at 3% so the five

00:52:49 --> 00:52:52:

year swap. So if we could go around the room

00:52:52 --> 00:52:54:

quickly and and then I can roll into the the25

00:52:55 --> 00:52:58:

final sets but actually I'll I'll start with you what

00:52:58 --> 00:52:59:

do you think? Great day.

00:53:01 --> 00:53:04:

Um, thank you for starting with me. I would say

00:53:04 --> 00:53:07:

between 4 and 4.5, meaning 100 to 150 bips of

00:53:07 --> 00:53:08:

risk premium.

00:53:09 --> 00:53:10:

Yeah, again.

00:53:11 --> 00:53:12:

1 1/2.

00:53:12 --> 00:53:14:

4 1/2 I see.

00:53:15 --> 00:53:17:

4 to 4 1/2.

00:53:19 --> 00:53:23:

But expecting a a scarcity of taxonomy compliant assets on

00:53:23 --> 00:53:26:

the one hand and also expecting for some asset classes

00:53:26 --> 00:53:30:

also rental increases will which will be factored in to

00:53:30 --> 00:53:32:

decrease that that that that yield.

00:53:37 --> 00:53:40:

I feel not qualified to answer this.

00:53:41 --> 00:53:44:

Especially with already 3 answers, what else can I I

00:53:44 --> 00:53:46:

could have said 4 1/2?

00:53:49 --> 00:53:51:

Appears to be the magic the magic number OK.

00:53:53 --> 00:53:56:

We have absolutely hit our time limit. Now it's so

00:53:56 --> 00:53:59:

it's 126. So I'm conscious that we need to to

00:53:59 --> 00:54:02:

wrap up at this point and I'd like to obviously

00:54:02 --> 00:54:06:

thank all of the panelists who joined me here today.

00:54:07 --> 00:54:12:

You will see a a feedback poll appear on your00:54:12 --> 00:54:18:

screens. Please provide your feedback to the to the UI

00:54:18 --> 00:54:20:

and to PwC.

00:54:21 --> 00:54:23:

I know the UI wants to hear from you. It's

00:54:23 --> 00:54:27:
00:54:27 --> 00:54:29:

very keen to improve their webinars, make their seminarie
better.
So please do respond. Why do you click your way

00:54:29 --> 00:54:32:

through that? I just wanted to thank you, I personally,

00:54:32 --> 00:54:35:

for allowing me and inviting me to moderate today, and

00:54:35 --> 00:54:38:

of course to thank all of the fantastic panelists we've

00:54:38 --> 00:54:38:

heard.

00:54:38 --> 00:54:39:

From.

00:54:39 --> 00:54:42:
00:54:42 --> 00:54:44:

Who've joined us and and showed their perspectives, ofcourse.
There's a huge thank you from all of us in

00:54:44 --> 00:54:46:

the industry to the UL team, to the set, to

00:54:46 --> 00:54:48:

her her team, and to Garrett and PwC for the

00:54:48 --> 00:54:51:

work that goes into Emerging Trends survey in the report

00:54:51 --> 00:54:52:

itself.

00:54:52 --> 00:54:56:

You know clearly we should thank everybody who takes the

00:54:56 --> 00:54:59:

time to also fill in this report and contribute. It26

00:54:59 --> 00:55:03:

remains an incredibly important window on the wonderfulworld that

00:55:03 --> 00:55:06:

we all Occupy and this year's report that's the 20th

00:55:06 --> 00:55:09:

in this series is is as excellent as ever and

00:55:09 --> 00:55:12:

thank you to to you and I for that PwC

00:55:12 --> 00:55:15:

with that and the I think the questionnaire is is00:55:15 --> 00:55:19:

revolved through, I can certainly sign off. Thanks for joining

00:55:19 --> 00:55:22:

us today. Have a great afternoon and we hope to

00:55:22 --> 00:55:22:

see.

00:55:22 --> 00:55:23:

Each other soon, I guess.

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