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M&G Real Estate: finances EUR62m

Student housing scheme in Italy

M&G Real Estate finances a EUR62.1m student housing development in central Bologna. Stonehill is developing a 513-bed, purpose-built scheme. The EUR4bn M&G European Property Fund manager has agreed to finance the development. Students are expected to be able to occupy the 15-storey building by summer 2022.

David Jackson, manager at the M&G European Property Fund said that the acquisition would increase the fund’s exposure in the rapidly growing European institutional residential markets. This will provide strong diversification potential and potential for rental growth.

“We are particularly drawn to the opportunities in France, Italy and The Netherlands, and we are looking to expand our exposure in these markets.

Alex Greaves, M&G Real Estate’s head of residential investment, stated: “Residential housing is a consumer product. It requires tailoring apartments and homes to their target demographic and geography in an economically sustainable way. This is exactly what we have done in the UK since 2013.

Combining our European experience with our knowledge of UK residential investment shows that we have the ability to increase our capacity to structure and identify more deals. We can also provide clients with access to quality real estate with long-term value across all spectrums, from student accommodation to senior housing.

M&G Real Estate adds Korean logistics centre to core Asia property portfolio

M&G Real Estate purchased its second South Korean logistics facility for KRW155.5bn (EUR120m).

It has acquired the 100,000-square-metre Yongin Baegam Logistics Centre in Seoul as part of its core Asian property strategy.

Richard van den Berg is the strategy manager. He stated that “We are optimistic about the fundamentals of Asia Pacific’s logistic sector, especially in Korea, where demand is strong and supply is limited,”

Van den Berg stated to IPE Real Assets that South Korea’s logistics sector is receiving much attention from both domestic institutional investors and foreign institutional investors. This is similar to the rest of the globe.

He said that similar to China and Japan, it was the absence of modern logistic facilities that drives strong occupiers (tenants) upgrades and relocation requests for more modern, high-spec industrial space.

The South Korean logistics sector could see a decrease in supply due to a shortage of land or approvals for warehouse construction. This is especially true for areas close to major highways and clusters.

He said, “The continuing investor interest should drive yields higher for well-located and prime logistics space.”

He mentioned Euromonitor’s research, which showed that South Korean online retail is likely to account for more than 35% in total retail spending by 2023. This figure could increase from US$72bn to US$133bn in 2018, or both.

Online sales account for 27% currently of all South Korean retail sales.

Van den Berg stated: “M & G has been investing in South Korea from 2006, and our first logistics investment in South Korea was Homeplus Hub in Ansung. Acquired in 2017, Van den Berg added.

“Our investment experience in Korea has been both positive and profitable from a capital appreciation and income perspective.” We will continue to search for logistics assets in South Korea of high quality and well-located that match our investment strategy.

M&G Real Estate’s Global Outlook Report predicts that continued uncertainty will be the new normal for commercial realty.

These findings show how investors are being faced with major, unanticipated economic changes and major shifts in work/life balance. This may eventually force investors to repurpose assets. This also shows the growing gap between sustainable assets and those that are’stranded’. Climate action and social equality are having a greater impact on business models than ever, especially with many governments’ aspirations to net zero carbon emissions over the next decade.

According to the report, the world is moving towards a more risk-off environment in 2020. This means that uncertainty in markets has become the “new normal”. Real assets are the best asset class to provide multi-asset investors with a safe haven, as interest rates and bond levels remain low in Europe and the UK.

M&G’s research shows that, while many economies have begun to recover from the COVID-19 crisis’ initial effects, their speed and strength will depend on the effective implementation of a medical solution. These findings highlight the difficulties governments face in balancing the need to manage COVID-19’s spread in the short-term while reducing its long-term effects on society and economies.

The relative success of Asian markets in managing the pandemic, which was supported by strong fiscal and monetary support from the governments and better preparedness for a pandemic like the flu, has led to a generally less negative economic impact than Europe. This positions the APAC developed economies for a quicker recovery.

Jose Pellicer, Head of Investment Strategy at M&G Real Estate says that 2020 will be known as the “year of the pandemic”. COVID-19 is a global epidemic that has impacted economies and communities all over the world. A thoughtful and targeted response must be taken to address its aftermath.

“In many markets the response to the virus accelerated or consolidated already established trends such as home-working for those who are able. Future investment decisions should be guided by the environment we all operate in. We must also accept that there will always be uncertainty.

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