Discover our broad range of real estate strategies, with investment opportunities from around the globe.
From core to opportunistic, in debt and equity, we manage the full spectrum of real estate assets globally.
Our real estate team has over 20 offices with professionals working throughout the globe.
Providing platform stability and global consistency with a fine-tuned investing process since 1983.
Uncovering unique real estate opportunities around the globe requires viewing the asset class from every possible angle. Our multi-dimensional view of real estate — throughout the capital stack and across the risk/return spectrum—combined with all the aspects of our business work together to create a robust picture of each investment opportunity. Invesco Real Estate has actively invested from core to opportunistic in debt and equity for over 40 years.
Our growing business in Europe, North America and Asia via separate accounts, commingled vehicles and mutual vehicles strengthens our ability to underwrite and execute deals. As we use innovation to grow portfolios, we are continuously identifying emerging sectors and launching new fund structures to benefit investors.
| High quality direct real assets | Durable income with NOI growth | Daily pricing |
|---|---|---|
| Provides instant access to a highly diversified portfolio of over US$30 billion, with around 240 high quality direct real estate assets in the US, Europe and APAC regions. | Aims to provide durable income and strong net operating income growth , which is generated by high quality credit leases. | Combines global real estate investments, listed real estate, cash and cash equivalents for liquidity. |
The Invesco Global Real Estate Strategy is designed to provide investors with daily pricing and liquidity while accessing direct global real estate investments.
The strategy allocates approximately 70% to high quality direct real estate, and 30% to real estate securities and cash/cash equivalents. The idea is to deliver stable income with NOI growth, diversification and strong relative performance – all while offering daily liquidity and pricing. This makes the strategy particularly relevant for smaller pension fund and Insurance investors who wish to gain access to the same assets as large institutional investors.
| Deep local relationships and expertise | Focus on income | Globally diversified portfolio |
|---|---|---|
| Our on-the-ground experience, reputation and deep local relationships give us a significant competitive advantage in sourcing opportunities for our clients while executing a consistent global strategy. | Our focus on “high-quality” assets should provide durable and growing income over time while also proving relatively resilient to any downturns. | The four underlying strategies have exposure to around 240 high quality investments worldwide and provide access to a highly diversified portfolio across sectors and regions. |
The Global Direct Real Estate Strategy is a proprietary strategy only available from Invesco. As such, it benefits from our global platform and regional strategies. More specifically, it invests in four open-ended Invesco Real Estate strategies, two invested in the US (core and income) and two core strategies in Europe and Asia. We aim to meet our return objectives by constructing a balanced, diversified portfolio of high-quality real estate that can generate durable income. The strategy offers a low correlation to stocks and bonds and a higher correlation to inflation.
| Manage-to-Core Approach | Durable and growing income | Building on quality |
|---|---|---|
| Our portfolio has an active approach to the European real estate opportunity. We aim to create the highest quality with investments aimed at tomorrow’s customers. Our strong focus on manage-to-core assets, e.g. we invest exclusively in good locations and enhance the quality of the properties there, drives the performance of the strategy. | We focus on assets with high occupancy and with high-quality tenants. NOI (Net Operating Income) growth is driven by indexation and active leasing momentum. | Our portfolio is well diversified across European countries and the office, retail, logistics and residential sectors. Allocations anticipate secular trends and drive performance. The focus is on excellent locations, long leases and strong tenants. |
In our European strategy, we create a diverse, balanced pan- European portfolio by focusing on location, building quality, tenant strength and rental levels to target a sustainable net distribution income. The strategy aims for durable and growing income driven by our active approach to portfolio management). Our underlying strategic principles underpin a strong core investment portfolio providing resilience through cycles with our consistent investment themes approach. The strategy is 5-star GRESB* rated and SFDR Article 8 compliant.
| Differentiated Deal Flow | Income focus | Diversified portfolio |
|---|---|---|
| Our on-the-ground experience, market reputation and deep local and longstanding relationships give us a significant competitive advantage in sourcing transactions and off-market opportunities for our clients. | We aim to construct a well-diversified, income-oriented portfolio with income accounting for at least 50% of returns. | Invesco Real Estate focuses on high-quality assets in seven key markets, including Australia, Japan, South Korea, Hong Kong, China, Singapore, and New Zealand. We have expertise across the office, retail, industrial and residential rental sectors. |
The strategy offers the possibility to invest in a broadly diversified real estate portfolio. The focus is on high-quality, high-yield properties with long-term leases in gateway markets in the Asia-Pacific region. We aim to meet our return objectives by constructing a well-diversified and balanced portfolio of high-quality real estate, which is focused on total return and long-term income.
| Offering stable, high-yield income | Established excellence | Open-ended structure |
|---|---|---|
| Our strategy aims to offer a stable, high-yielding income stream with significant asset-backed downside protection. | Established team with 11-year track record and 20+ years of experience, €1.7bn of loans originated across 6 European markets. | Innovative approach to an otherwise illiquid asset class. The strategy’s open-ended nature allows for greater liquidity than otherwise available. |
Our direct lending strategy is focused on the direct origination of income producing loans secured on high quality assets, with strong ESG credentials. As an alternative lender our approach focuses on a ‘property first’ philosophy focused on the assets, the business plan and the sponsor. We favour a diversified range of sectors from logistics to hotels and student accommodation across the UK and Western Europe and have the advantage of utilising the expertise of our on-the-ground teams across Europe to fully understand local market opportunities.
| Relative value | Fundamental value creation | Risk discipline |
|---|---|---|
| Focus on optimising the capital structure entry point, diversifying execution across markets and product types, and leveraging the unique Invesco platform. | Position one step ahead of competing capital and anticipate the acquisition expectations of core purchasers in the future. With this in mind, the strategy exploits inefficiency at entry and aims for fundamental value creation during ownership. | Invest with a quality and location bias with appropriate use of leverage. “All-weather” investment principles aiming to perform in a dynamic market environment. |
With an emphasis on relative value and the flexibility to invest across the full capital structure, our value-add strategies are positioned to act with speed and conviction to take advantage of acquisition opportunities that arise during a period of economic uncertainty in Europe. Invesco Real Estate’s third European value-add strategy aims to capitalise on market disruption in order to capitalise on short-term pricing opportunities as an attractive entry point to fundamental, long-term value creation.
We seek attractive risk-adjusted returns consistent with sustainable investment principles, focusing on sectors in structural transition with opportunities to improve or create next generation real estate. In addition, we have access to proprietary partnerships, where we believe there is compelling value to be created from vertical integration in an increasingly operational environment.
| Income potential | Diversification | Volatility |
|---|---|---|
| Potentially higher levels of income versus traditional equity and fixed income asset classes. | Historically lower correlation to broader equity markets. | Traditionally less volatility and downside capture compared to real estate equity-only approaches. |
Invesco’s Global Real Estate Income Securities (GREIS) Strategy invests across the entire real estate capital structure – i.e. listed equity, Commercial Mortgage Backed Securities (CMBS), corporate debt and preferred equity. The goal is to produce equity-like returns and a high level of current income, while mitigating against volatility and drawdowns.
| Growth sector | Established portfolio | Market opportunity |
|---|---|---|
| The strategy provides access to a growth sector with positive demand / supply fundamentals. The hotel sector benefits from increasing tourism and business travel in key gateway cities across Europe. | The strategy allows exposure to a diversified, pan-European hotel portfolio of high-quality central assets with best-in-class ESG credentials and further growth potential. | With strong operating performance and tenant demand the strategy aims to utilise good market timing to access assets at attractive pricing and targets active repositioning to drive performance. The strategy is well placed to take advantage of the market opportunity to add to returns. |
Hotel real estate is an established sector, providing long-term income potential from high-quality assets and locations in major European cities with balanced demand drivers and with inflation-linked long- term leases. Healthy supply and demand fundamentals in the sector remain supportive and provide further growth opportunities. Our intent is to create investments that can deliver long-term compound growth above the market.
00:16:0 - 00:20:4
My name is Simon Redman, Managing Director at Invesco Real Estate. Welcome.
00:20:9 - 00:29.6
Today we'll be taking a deeper dive into the world of real estate investment by bringing to you what we think are currently the most relevant investment opportunities and topics.
00:30.7 - 00:50.6
We'll discuss what we see as one of the most compelling real estate opportunities worldwide, investing in high quality European real estate now to take advantage of investing at prices up to 50% lower than two years ago, and with the objective of delivering returns of 15 to 20%.
00:46.0 - 00:56.2
Joining me today to provide some specific examples and insight is Kevin Grundy, Head of funds and Invesco Real Estate Europe, and who leads our team seeking value add and opportunistic investments.
00:56.5 - 01:04.3
While there are tremendous opportunities it's also possible to make mistakes and it's essential to understand and navigate what these are, to avoid some of the pitfalls.
01:05.3 - 01:11.9
We hear a lot about higher interest rates, moderating G d P growth and banks being conservative, which for many is concerning.
01:12.4 - 01:20.2
It's exactly this uncertainty that allows us to unearth compelling investment opportunities without the levels of competition that were a year or so ago.
01:21.0 - 01:24.4
Kevin, welcome. So perhaps you'd give us a little bit of that insight.
01:24.7 - 01:27.7
Thanks, Simon. It's, um, it's a question I get asked a lot.
01:28.3 - 01:56.1
I've been investing in value add real estate for more than 20 years now, and I think this is one of the most exciting times for the market. Um, and, and the reason is that we're in the middle of a repricing clearly, but the reason behind the repricing has actually only a little bit to do with the underlying real estate, and really it's being driven by an external factor, which is interest rates.
01:53.2 - 02:16.0
So if, if we were sitting in a university lecture right now, our professor would be telling us about how the rise in the risk-free rate means that when you discount the cash flows you get from real estate, they're worth less today than they were maybe a year or two ago. But real estate is, is kind of a simpler business than that. And what everybody in the industry is really talking about is the fact that it costs so much to borrow.
02:16.9 - 03:11.8
So we are a leveraged asset class people borrow to buy real estate, and it, it's just too expensive now compared to where yields were a year or two ago. So what needs to happen is the pricing needs to drop to a yield that is attractive enough for people to want to buy. I'll give, I'll give you an example of how this works in practice. So, uh, last year we sold a logistics property in Germany for a yield of about 3%, and the borrower in that case would have borrowed at a fixed rate, fixed interest rate of 0% plus a margin. If we were selling that exact same property today, the borrower's fixed rate would be 3% plus a margin. So that's a shift of more than 300 basis points when you add it all up. And that means that the pricing that we sold at the 3% is more like 5% today. It has nothing to do with the underlying real estate and everything to do with the interest rate environment.
03:12.1 - 03:13.2
So, Kevin, that makes sense to me.
03:13.3 - 03:16.7
But our investors taking advantage of these opportunities today.
03:17.5 - 03:29.4
We think they should, but unfortunately, many of them can't. What we think people should be doing is carefully playing offense here, trying to take advantage of what will be effectively bargain prices.
03:30.3 - 03:38.9
But the problem for a lot of investors is that they are stuck playing defense with existing legacy portfolios. So there are two sides to the coin here. If you're buying something at a discount and you're in a market with disruption and you're a buyer, it's a great advantage. If you're a seller, it's a headache.
03:47.9 - 03:52.0
And unfortunately, a lot of people are in the selling position right now or are somehow constrained.
03:52.4 - 04:01.0
So, you know, if you are going to be a first mover back into the market now, how do you know, how do you know that you're gonna get great value from this?
04:01.2 - 04:04.4
You know, could prices still fall? Could value still fall?
04:04.6 - 04:09.2
Yeah, so the first thing is not to believe that you can time the market.
04:09.4 - 04:28.4
You have to accept that upfront. Nobody can do it. And then you, you try to peel it back to real estate fundamentals. So if you're an environment where it feels like there are a lot of cheap deals available, cheap shouldn't be good enough, you know, it should only work if there's an underlying exceptional real estate story.
04:28.9 - 04:45.0
So the way we like to look at these things is, um, to break that back to things like replacement cost. You know, that that's something that 20 years ago, 10 years ago was very commonplace, people doing that kind of analysis, and it just stopped as the market was rising and everyone was making money.
04:45.3 - 04:48.6
You gotta come back to that. Um, you wanna discount to replacement cost.
04:49.1 - 04:54.1
You also wanna run sensitivity analyses on rents and yields.
04:54.5 - 05:11.6
In fact, I go so far as to say, not only should you not assume that you won't time the market perfectly, you should assume that you're gonna time the market quite poorly and build in a buffer in your returns in order to be able to deliver even if you get it wrong in the market.
05:12.0 - 05:19.2
So I, I like the sound of that. Um, but re real estate's a a tangible asset class, you know, you can touch it and feel it.
05:19.5 - 05:24.1
Do you have any live examples or recent examples that you can provide us with to give this, you know, some sort of evidence to, to what you're thinking?
05:26.9 - 05:50.7
I've got a couple of examples that that might help. Um, one of them is more to do with, um, taking advantage of a motivated, uh, seller environment. Um, and the second one has more to do with structure, and we should definitely take some time to talk about structure. I think that's important in this market. Um, but the first one, in terms of a motivated vendor. So at the end of last year, we acquired a city center office property in the middle of Amsterdam.
05:51.4 - 06:01.8
Um, it's a grade A property, nothing wrong with the asset, but because of the turmoil in the equity and fixed in income markets, the owner of the real estate needed to sell to balance their portfolio.
06:02.3 - 06:22.8
So we did a very quick transaction in December, closed the deal in four weeks, market that summer. It had failed in its initial process. So a third off you might say, how do you know that asking price was the right price?
06:23.3 - 06:50.2
And that's where we come back to replacement cost as an analysis. So, um, the, our estimate of the replacement cost for that building was about twice what we acquired the physical property for. So fundamental value, um, before people think we're crazy for buying offices, because I know it's out of favor in many parts of the world, Amsterdam, where the museums are, you know, right in the middle of everything.
06:50.9 - 08:39.3
Um, it's a grade A building, it's highly sustainable, really important, we should come back to that. Um, and also in that particular market, robust tenant demand in the city center and the vacancy rate is about 3.5%. So the fundamentals really stack up. This is a, a more recent example that we're working on right now, and it's in, uh, central Europe. It's in the logistics sector, which has been really the darling of real estate for for many years. This is a, uh, a developer who has a great project, strong developer has already signed a pre-lease with a fantastic tenant that and you're talking about structuring deals and how to put them together at the moment. Mm-hmm. Um, but I'm sure what you do is not just solely opportunistic, it's not just deals that happen. Uh, and you mentioned sustainability earlier.
08:39.5 - 08:39.8
Yeah.
08:39.8 - 08:44.8
And are there particular themes that you follow above and beyond just being opportunistic?
08:44.8 - 09:00.0
Yeah, so two parts of what we do, we certainly look for the individual opportunities, but there is a discipline to it, and there are themes that we are that we're trying to follow. Um, it, it might interest people to know that the very start of a value add or an
10:35.5 - 10:40.4
So everything we're looking at right now is with a sustainability lens to it.
10:40.8 - 10:48.7
Um, offices maybe are the one to 0.2 in particular because you almost can't do offices without that kind of brown to green angle to it.
10:49.1 - 10:53.7
But sustainability is everywhere. It's with the tenants, it's with the investors.
10:54.1 - 10:57.6
And I think you ignore it at your own risk for the next few years.
10:58.2 - 11:06.2
Look, this sounds all incredibly compelling, um, but you know, why isn't everyone doing it now? Why isn't everyone investing now?
11:06.5 - 12:11.2
Yeah, so Europe is a, um, is an opaque market generally speaking. And in, in the individual countries, rely entirely on a local presence within our business.
12:11.6 - 12:22.8
We like to partner with best in class operating partners. So you get the benefit of all of the relationships of our offices, plus the relationships of the partners that come back time and again to work with us.
12:22.9 - 12:25.5
So Kevin, thanks ever so much for that insight.
12:26.2 - 12:39.2
If I were to summarize the repricing of real estate markets provide some really compelling opportunities to invest today at pricing much lower than it was two years ago. And by choosing the right sectors, we see some strong rental growth and performance opportunities.
12:40.1 - 12:45.0
Thank you for listening. And if you'd like any more insights, please do get in touch with your local Invesco contact.
In this 12-minute podcast, we look at what today’s interest rate environment means for real estate investors. Find out how it is creating opportunities in the “value-add” space.
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*Source: GRESB, as at 2023. As real estate investors and property owners utilize ESG reporting, the Global Real Estate Sustainability Benchmark (GRESB) provides transparency and consistency for related standards and reporting.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Property and land can be difficult to sell, so investors may not be able to sell such investments when they want to. The value of property is generally a matter of an independent valuer’s opinion and may not be realized.
All data is provided as at 30 June 2024, unless otherwise stated.
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EMEA3794450/2024
