Please introduce IP Investment Management to The Yield’s readers
IP Investment Management (IPIM) was established to provide private clients a straightforward way to invest in direct institutional-quality real estate assets in developed markets, via a regulated platform.
Our roots go back to 2011 when our founding team worked together at our sister company IP Global. We brought together a unique set of skills, network and experience, and a concept that we knew would resonate well with investors. IPIM was incorporated in 2013 in Singapore and we subsequently set up the Hong Kong office in 2016. We now hold a CMS license under the MAS in Singapore and Type 4 and Type 9 licenses with the SFC in Hong Kong.
To date, the team has invested in 25 transactions with a gross development value over USD500 million.
What is IPIM’s investment strategy?
We have the benefit of having no rigid mandate so we can be flexible and consider opportunities across different sectors and markets.
While we do consider macro factors, investing on a deal-by-deal basis allows us to assess the merits of each deal on a standalone basis.
Investing in this way rather than raising a blind pool fund gives us flexibility and means we don’t have pressure to rush into deploying capital and compromise on investment quality. If we do not see any interesting opportunities at a given time, we can afford to wait.
We favour asset strategies towards the value-add and opportunistic end of the spectrum. A significant proportion of our investments have been ground up developments, where we aim to develop, stabilise and sell within 3-5 years. In development projects where there are many moving parts, it’s crucial for us to reduce risk of delays as much as we possibly can, so we tend to take little or no planning risk.
We also seek out built assets that are not operating at their full potential. They could be mis-managed, undervalued, or in need of refurbishment or upgrades.
In terms of deal size, we focus on middle market deals, around US$10-50m in gross development value. This is a perfect space for us where we have sufficient scale yet are not competing with larger institutions.
What are your target markets?
We focus on developed markets, predominantly UK, USA, Europe and Australia. From a macro perspective, the depth of these markets both in terms of tenant demand and institutional capital puts us in good stead to lease up and exit our investments predictably.
What asset classes do you like?
As for asset types, we look for themes that are underpinned by favourable economic and demographic trends. This includes residential sectors like Build-to-Rent / Multifamily, Purpose-Built Student Accommodation (PBSA) and Senior Housing. A mix of opportunities across these sectors lets our clients capitalise on the major trends underpinning occupier demand.
UK PBSA is one asset type we have invested in significantly. PBSA rental growth has outperformed office, industrial and retail over the last ten years with 4.5% year-on-year growth, vs. 1.8% and 1.4% respectively for office and industrial. Yields have also compressed significantly as growing demand for a limited number of assets continues. It is no surprise the sector has grown rapidly over the last decade, being valued at over £50bn last year.
Our team completed the first transactions in 2011, and we have invested in 12 deals in total, having exited 5 so far. During this time, we’ve seen a maturing of the sector with a significant increase in cross-border capital. Blackstone’s £4.7bn acquisition of the IQ portfolio from Goldman Sachs in February this year is evidence of how far the sector has come. Despite this, we continue to see good opportunities in regional markets underpinned by strong supply and demand dynamics, but as always, we do our homework. As the sector has grown, new, less experienced investors have entered the market, and this also presents us with buying opportunities for mismanaged assets.
Another sector where we have made investments is the multifamily sector, or Build-to-Rent as it is known in the UK. In developed markets like the UK and US we are seeing a continuing shift in preferences for renting over owning property. Affordability is one aspect, but a significant share of renters choose to do so because of their lifestyle and to maintain flexibility. In many markets there is a growing preference to rent from a ‘corporate landlord’, i.e. professionally managed properties, where the level of service is often higher.
The senior housing sector is one we are considering seriously but have not yet invested. With the over-65 population set to more than double to 1.6 billion by 2050, it is hard to ignore how this incredible demographic shift will impact real estate. Demand for good quality well-located retirement communities for active seniors will grow significantly as populations age, and we intent to capitalise on this as we find the right opportunities.
These sectors taken together have also been called the “rental property ladder”, where renters are able to easily move to accommodation that suits the current point in their lives; from purpose-built student accommodation, to rental apartments, rental houses, then purpose-built senior housing communities. This does not mean home ownership will disappear any time soon, but the trend certainly presents interesting opportunities for investors.
How are they impacted by COVID-19?
The residential sectors tend to be seen as generally defensive and have been less volatile throughout prior recessions, when compared with mainstream sectors like office and retail.
For instance, UK PBSA saw a 30% increase in applications from students over the GFC period, as students entering a difficult job market stayed in higher education to pursue advanced degrees. Many who left the workforce also returned to study. COVID-19 is certainly not the same kind of crisis, but challenges in the job market could lead to similar growth in student numbers. Other trends are long term; a growing middle class in China and India who will seek overseas education, and a 25% growth in the number of 18-year olds by 2030. These trends will outlast the short-term impact of the outbreak.
Preferences may also change as a result of COVID-19. Students may prefer studio accommodation or low-density cluster apartments as opposed to high density blocks with shared bathrooms, for example. This will pose both challenges and opportunities for universities and asset owners who may need to reconfigure their existing accommodation.
In the multifamily space the impact will be highly dependent on the city, area, and class of asset. Undoubtedly there will be short-term challenges in rent collections in certain areas and for certain classes of multifamily. We continue to have confidence in well-located class A assets in strong diversified economies. Mid-to-long-term we could see the COVID-19 pandemic accelerate the trend for renting. In times of economic uncertainty many will be reluctant to take on liabilities like mortgage debt and would prefer to remain flexible.
On the whole, it goes without saying that low interest rates remain a boon for property owners and investors, and we expect the recent rate cuts to remain in place for some time.
What types of investors are you interested in hearing from?
Our clients are predominantly high-net-worth individuals and family offices; investors who are interested in diversifying their real estate portfolio but don’t have the time or the expertise to source and manage real estate deals for themselves. For individuals, the capital requirement is also a significant barrier. For these investors we can offer compelling deals in non-traditional sectors, that can sit alongside and complement direct property ownership and REITs.
For investors such as family offices, who may be looking to deploy larger sums (US$8m+) and have full ownership and control over a particular asset, we can work on a mandate and offer a completely bespoke end-to-end service.
From a regulatory standpoint, we are able to accept Accredited or Institutional Investors as per the criteria Singapore Securities and Futures Act, and Professional Investors as per the Hong Kong Securities and Futures Ordinance.
Why work with IP Investment Management?
Now more than ever, we expect to see continued growth in demand for private real estate investments that have low correlation with public markets.
At IPIM, we offer investors several things. Firstly, a high degree of transparency. Our model of investing on a deal-by-deal basis provides investors with a very clear understanding of where and how their money is being invested; from the specific sector, market and location to the partners, debt arrangements, anticipated timelines and so on. This allows investors to be fully informed before making any investment decisions. It also allows clients to create their own portfolio of PERE investments based on risk-appetite, asset types, and geographies.
Secondly, accessibility is key, hence we keep our investment minimums lower, and target deals with investment horizons of 3-5 years, as opposed to the 7-9 year term that are common from larger institutional PE fund managers.
Finally, we are forward-looking, identifying new trends and sectors that are well positioned for growth over and above more mainstream real estate asset types.
For more information on IPIM’s investment strategies, please get in touch with Ben Willsher at firstname.lastname@example.org.