Despite the current market environment being ‘one of the most exciting times we’ve seen’ in real estate, Madison International Realty is very cautious about where it puts its money, says Michael Siefert, managing director and head of the firm's European business platform.
Speaking on Day One of Expo Real 2024, Siefert said the market dislocations and reduced liquidity over the past two years have provided numerous opportunities for Madison, a direct secondaries investor which provides equity capital or buys into ownership structures which need funds to move forward.
‘If you look at the world today with changing interest rates, there has been a massive repricing in the market. We provide liquidity in situations where people need it, which has meant sourcing opportunities in the UK, Continental Europe and in the US,’ Seifert said, adding: ‘It is one of the most exciting times we’ve seen.’
Despite this, Madison has remained very selective about where it puts its money. Noted Carey Flaherty, the firm’s chief investment officer: ‘When we first started conducting this business 20 years ago, we were asset class-agnostic. Today the whole market has shifted. Investors are much less agnostic about where their capital goes – investors have strong views on offices and retail. Conversely, there are some newer segments like data centres and cold storage with strong operating fundamentals that are establishing themselves going forward.’
Added Siefert: ‘You are seeing growth trajectory on the income side in these newer asset classes – it’s a whole different ball game in terms of income growth.’
Observed Alex Lukesch, managing director and head of European investments: ‘Because we are direct secondaries investors, we are not bidding in an open market process, but solving liquidity issues for people, often in their own capital stack.’
He added: ‘London was an early mover in terms of repricing even vis-à-vis the US. Europe tends to lag both the US and the UK. Valuers were more realistic early on in London, while in Paris and Frankfurt owners are slower to face the music. That’s probably no different now. But while the bid-ask spread in London has reduced, it’s still there.’
Despite this, Lukesch feels that the market shouldn’t take too long to get back up to speed. ‘I predict a return to relative normality in the second half of 2025,’ he said.
Expo Real is a ‘unique opportunity to take the temperature of the market’, according to Flaherty. ‘There is something very unique about Expo, coming from the US where most events are sector-specific and it’s hard to get the pulse of the industry. Expo, meanwhile, is a litmus test for the sentiment of the market – one conference that represents a pan-European view.’
