An interest in operational assets and their potential for value creation is driving investors to renew their faith in hospitality, co-living and a slate of other bed-centric asset classes, delegates heard at MIPIM 2023.
The annual Cannes event, which attracted 23,000 delegates from 90 countries, was dominated by a sustainability message, including concrete solutions for tackling the net-zero challenge. Attendees meanwhile shared that this was a path they were pursuing as a matter of priority, despite macroeconomic headwinds and a tough climate for dealmaking and profit margins.
This latter aspect meant that asset classes with a strong operational element, including hotels, were particularly appealing, said Sophie van Oosterom, global head of real estate at Schroders Capital. “We see a big opportunity in assets where we can take an operational part of the income,” she commented at MIPIM. “Where we can work with tenants in a way to optimise contractual terms. Our teams are especially set up to do that in hotels, offices, retail and logistics. In an environment with high interest rates and greater uncertainty, our competitive experience can help drive value.”
The firm launched its debut pan-European hotels fund two years ago at the dawn of the Covid-19 pandemic, but van Oosterom said that had contributed to a learning curve. “During Covid, our €3 billion of hotels under management became an opportunity to pursue greater efficiencies, including addressing investments to tackle carbon emissions. Having done that, we found we were reaping the benefits coming out of Covid with a lot of ‘revenge’ leisure spending. In terms of acquiring hotels, we also benefitted from a number of generalist investors exiting hotels when they saw signs of market recovery.”
Co-living expansion
Another trending asset type at MIPIM was co-living, which Ivanhoe Cambridge head of Europe and co-head of Karim Habra praised for transcending classification and thus serving a broader user base. “Co-living is an extension of residential, but it’s also part hospitality, part student housing, and part affordable housing,” he said. “Furthermore, the demand is 10 to 50 times higher than current supply, which means that co-living has an exciting future.” Ivanhoe Cambridge became the largest institutional investor in Brussels-based Cohabs towards the end of last year, which Habra called a particularly “resilient” way to access the asset class. “When you invest in a successful operating company, you generate performance not only from the asset, but also from the operations. That’s essentially a private equity deal,” he said.
Southern Europe continued to set out its stall as a strong hospitality destination at this year’s MIPIM. Delegates heard from Savills that Spain, Portugal and Italy had seen record post-pandemic investment volumes of €31.7 billion, frequently benefitting from tourism bounce-back dynamics. The Mayor of Porto Rui Moreira said that his city’s sustainability-first message was impressing investors, while Fernando Ballesta, director of foreign trade, investments and industrial infrastructure at the Instituto de Formento de la Region de Murcia, said that a new airport and a high-speed train connection were making a difference to the Spanish region. Ballesta added: “We are trying to attract hotel development. We want more hotel chains to come to the region and have a portfolio of 36 sites ready for development.”
Similarly, Marinos Giannopoulos, CEO of investment agency Enterprise Greece, flagged investment opportunities in his country, and said that Greece had attracted some €6 billion of FDI in 2022 alone. Greece currently offers a variety of incentives, including a strategic investment law which allows a fast-track process of 45 days for closing deals. “We are the success story, but we are looking ahead to the future for greater investment opportunities,” he added.
Event focus
A number of cities pegged their investment hopes on major international events coming their way, with city authorities in Malaga, Spain, using MIPIM to push their Expo 2027 bid. The decision on the winning city will be taken in June, said Jose Cardador Jimenez, town planning and housing general co-ordinator, Malaga City Council. The city promises to launch 5,000 cultural activities as part of the three-month event If it wins and predicts that Expo would bring some 3.1 million visitors.
Other cities basked in bids won, such as Milan, joint host with Cortina d’Ampezzo of next year’s Winter Olympics, and Paris, which has completed ambitious infrastructure plans ahead of next summer’s Games in the French capital. The city is also very conscious of the challenge to create the greenest ever Olympic Games. Jean-Philippe Dugoin-Clement, vice-president of Ile-de-France, said the region first wrote an environmental plan in 2013 “but a lot of things have changed since then, so we are in the process of creating a masterplan to cover everything from mobility and housing to ecology and town planning”. What is notable is the impetus to create a joined-up plan which looks at the city as a whole, rather than individual assets. For example, the swimming pool for next year’s Olympics will be warmed by heat generated as a by-product of the new Equinix data centre in the city.
Paris’ position reflected a broader commitment to sustainability made by MIPIM organisers RX both in how this year’s event was run, and the selection of key notes. For the first time, MIPIM included a Road to Zero area which featured recycled materials and stands that will be reused at future events. Meanwhile, notable speakers including environmental thought-leader, Jeremy Rifkin, and Christophe Bechu, French minister for ecological transition and territorial cohesion. The latter called MIPIM a “precious opportunity for real estate professionals to share solutions regarding the climate crisis”.
Rifkin’s message was a little more stark, demanding that the real estate industry go far beyond current climate commitments. “This goes way beyond ESG, although that’s a start. We have to work with, and adapt to, nature again.”
A quartet of female keynotes on the second day of MIPIM also underlined the centrality of ESG goals. While Veronique Bedague, CEO of real estate developer Nexity, predicted that the “cities of the future will be more beautiful and calmer”, global head of AXA IM Alts, Isabelle Scemama, stressed that ESG strategies shouldn’t lose site of the fact that sustainability drives were about “making buildings more efficient, not just collecting data”.
Valerie Vaughan-Dick, the new CEO of the Royal Institute of British Architects, meanwhile challenged existing regulatory frameworks while she reminded delegates of the “great tragedy of Grenfell”. The chief executive of the World Green Building Council, Cristina Gamboa, pleaded with the real estate community not to forget the ‘S’ and the ‘G’ in ESG. “Projects transform communities,” she said. “We mustn’t underestimate their impact.”