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EXCLUSIVE: Single Family Offices' Real Estate Investments: The Shadow Of COVID-19

Alastair Graham, 18 May 2020

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In exclusive data provided by Highworth Research, this news service examines real estate investment activity of single family offices, mainly in Europe. The data brings some possibly surprising facts to light.

Single family offices have long regarded investment in real estate as a core element in their overall portfolio. Statistics from the Global Single Family Offices Database from Highworth Research and WealthBriefing – which is media partner to this organisation - show that the asset class ranks third in family offices’ allocation preferences, with 74 per cent of family offices globally outside the US investing in property. (To receive information about accessing the Highworth Research database, click on this link.)

Only private equity and public equities rank more highly, with respectively 83 per cent and 76 per cent of single family offices allocating to these asset classes.

Top ten countries for family office real estate investment
Does allocation to real estate vary by country? The Single Family Offices Database shows the following percentages of SFOs in each of the top 10 countries allocating to real estate:

SFOs allocating to real estate    



There are some interesting takeaways from this list:

-- If the oil price recovers the Gulf states may not have a problem with overweight allocation to real estate except for Dubai where the economy is excessively dependent on inflows of tourists to sustain the hotels sector and expat businessmen to rent apartments; 
-- It is surprising that Hong Kong is not higher on the list given the enormous value of property in the territory; and 
-- German SFOs appear to have a healthy, well-balanced approach to real estate investment – not too much, not too little. 

Winners and losers among property investment sectors
Does family office investment in real estate vary by property sector? At a time when the coronavirus overshadows most investment decisions, real estate has winners and losers depending on sectors. The Single Family Offices Database can be interrogated to show which SFOs invest in which property sectors, and therefore which may be facing enhancement or impairment of the value of their property investments. 

Family offices which hold investments in offices, retail, mixed use, and hospitality, will have serious concerns at present. Those which have investments in logistics and warehousing, agricultural land, some types of residential property, and certain specialised property micro-markets, will be more relaxed. 

Investment in office property
COVID-19 has made many companies re-think their approach to the need for office space. Jes Staley, CEO of Barclays, has said that placing “7,000 people in a building may be a thing of the past.” Land Securities plc, with a property portfolio valued at £12.8 billion ($15.2 billion), reported on 12 May that only 10 per cent of the company’s offices were occupied. The new normal of home working may continue to a large degree in the future.

The outstanding example of a family office investing at substantial scale in the international office property market is Pontegadea, the SFO of Amancio Ortega, the founder of the “fast fashion” company Inditex. Inditex’ dividends paid to Pontegadea over the past three years have been well in excess of €1 billion ($1.08 billion) a year, and most of this has been invested in office buildings in prime locations in Europe and the US. The family office’s real estate portfolio had a value of €13 billion in March 2020. Will Mr Ortega’s investment advisors now aim for greater diversification of his assets post the coronavirus? The jury is still out.
 

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