UK Multifamily Update – 1H24



The UK economy grew by 0.7% in 1Q24, reversing the technical recession registered in the 2H23. Looking forward, consensus is for a 0.3% quarterly growth to the end of 2025, stabilizing at 1.4%p.a.

Inflation has also come down substantial, with the Consumer Price Index now trending closer to the 2%p.a. target of the BoE, down from the 6.7%p.a. recorded in 3Q23.

Expectation of a reduction of interest rates have increased, with the first cut of 0.50% expected in 3Q24, followed by further reductions to 3.7% by 3Q25.

UK Multifamily Update - 1H24

London House Prices

The elevated level of interest rates has taken a tall on London House prices, with the average home decreasing 1.85% this year, and 5.68% from the beginning of 2023. The favourable outlook for interest rates for the remainder of the year and into 2025 should prove more supportive for London house prices.

UK Multifamily Update – 1H24

Rental market continues to be strong due to the chronic shortage of housing, with rents up 7.44% and 11.75% respectively from the beginning of 2023 and 2022.

For a more detailed commentary about the UK Housing Market and the Built to Rent Market, see attached research from savills.


Chancery Lane

Currently we are fully focussed on the acquisition of 116-118 Chancery Lane which inshallah should close this week or early next week.


Important Links

UK Housing Market Update July 2024

Spotlight – Investment in UK Operational BTR

Commercial Real Estate – Mid Year Outlook

This week we received the Q2 valuations of the properties in our portfolio confirming our view that capital values have stabilized. With rental growth continuing unabated, we believe the stage is set to see some interesting total returns during the second half of the year and into 2025.

Public Real Estate Markets

The FTSE EPRA NAREIT Global REIT Index has delivered a negative return this year. After rallying strongly in the last quarter of 2023, REITs have fluctuated during the first half of this year, dipping in the middle of April but then recovering most of the losses by the end of June.

We expect that investors will progressively increase their exposure to the listed Real Estate sector to take advantage of decreasing interest rates.

According to Bloomberg Intelligence (BI), REITs operating in most property sectors are poised to grow net operating income in their portfolios, although growth rates may slow down. On average, tenant demand for assets is solid, with the exception of offices, and occupancy rates are elevated.

Debt costs for REITs are elevated, increasing interest expense and making refinancing more difficult. The Market is punishing REITs with LTVs above 30% by pushing share prices at a deep discount to NAV, on the expectation that dividends will eventually need to be cut as cheap loans are refinanced.

Nevertheless, we have seen some interesting buying opportunities during the first half, as in the case of Tritax EuroBox which has rallied 42% from the lows touched this year, with the last leg of the upside swing caused by news that Brookfield is considering making an all cash offer for the company.

Looking forward to the second half of the year, we expect that investors will increase their allocation to REITs in the expectation that lower interest rates will benefit the sector. According to BI, Real Estate transaction markets could loosen by 2025 if interest rates fall, setting REITs’ up for potential growth via acquisitions. Strong balance sheets should facilitate investments if capital markets and the transaction market are accommodative.

For more information, watch this webinar from the REIT Index providers:

Private Markets 

According to Green Street Advisors, US property pricing bottomed late last year and it’s been on the rise since then. There are a few property types where pricing is lower, but for everything else, pricing is flat or higher since the end of last year. The Green Street Commercial Property Price Index® increased 0.7% in June. Apartment prices increased 5%; pricing of other property types was unchanged

Always according to Green Street Advisors, the situation in Europe is similar, with property values having found their bottom this year. Indeed, we have also started seeing some improvement in our property portfolio, with most valuations flat relative to Q1 and some actually showing a small improvement.

As we can see comparing the shape of the US and European Green Street CPPI indexes, European property values have corrected much more during this cycle.

In our opinion this is partly due to the different valuation approaches. Whilst in the USA valuations are typically calculated using Discounted Cash Flows methodologies, in Europe the prevailing approach is Direct Income Capitalization based on market comparables.

As a result, we believe that European markets are currently a better place to deploy capital, since valuations are more reflective of the higher interest rate environment and the possibility to agree a deal with sellers greater.

For more information, watch the Green Street mid-year outlook webinar:

Recapitalization of the Long Income Fund

We recently announced our intention to recapitalize our Long Income Fund. Launched in 2018, the Fund has delivered steady distributions to its current investors who have now reached the end of their investment term.

The recapitalization will enable the Fund to provide liquidity to the existing investors and will enable incoming investors to acquire a diversified direct investment portfolio at an attractive valuation. As part of the recapitalization, we also intend to reduce the leverage attached to direct investments to a more sustainable level and exit all indirect investments in third party Funds.

For more information, please see the presentation on our dedicated Real Estate website:

Ruggiero Lomonaco
Head of Real Estate Funds

Rasmala to recap £400m long income portfolio

Rasmala to recap £400m long income portfolio


25 Jun 2024 16:15 BST | by Chris Borland

Vehicles managed by Middle Eastern group have assets in UK, Europe and US

  • What Rasmala is exploring recap options for a £400m long income portfolio
  • Why Firm is returning capital to some early investors, with fund also exiting indirect real estate positions
  • What next Stabilised platform should appeal to institutional capital with long-term time horizons

Investment manager Rasmala Investment Bank is seeking new investors to partially recapitalise its £400m long income vehicles, Green Street News can reveal.
The Rasmala Long Income Fund, together with its sister European and North American funds, owns a portfolio with a gross asset value of around £400m across the UK, US and Europe.
The Middle Eastern asset manager has initiated a three-stage process, aimed at recapitalising the fund and returning some capital to the fund’s original loan providers while positioning the platform for the next stage of growth.

“The recapitalisation and rationalisation of the portfolio will position our long income fund for the next phase of growth”

The fund primarily focuses on single-tenant net lease assets, including commercial long lease properties and social and economic infrastructure. Around 80% of the funds’ assets are based in Europe, with 20%
in the US.
Rasmala’s primary goal is to recap its direct investment holdings, worth around £250m, with fresh capital from institutional investors, large family offices and private equity firms. It is in discussions over an adviser, although no formal appointment has yet been made.
The new investors would gain access to an institutional-grade portfolio that is invested in life sciences, supermarkets, retail parks, hotels and logistics. There is flexibility around the recap element that could lead to sub-fund structures being set up for the European or US properties.

One of the standout UK properties is a Tesco superstore in Hattersley, near Manchester, which Rasmala bought from CBRE GI for £28.6m. It is let to Tesco until 2037. The UK portfolio also includes Aldi, Asda and B&M.
In Almelo – near Rotterdam, in the Netherlands – Rasmala is delivering a second modern logistics unit leased to Timberland Europe, to complement an adjacent unit acquired in 2019 and leased to the same tenant for a total investment of €90m. The property is currently built to suit the tenant’s specifications and has been leased for 15 years.

Rationalisation of platform

As part of the recap process, Rasmala plans to exit indirect investments in thirdparty funds and co-investment to focus on direct investments. This will allow the asset manager to manage redemption requests.
The recap plan also involves the repayment of asset-level debt, which is no longer accretive.
The Rasmala Long Income Fund, which was set up in 2018, is managed by Ruggiero Lomonaco. The fund initially raised $250m in 2019, and in the process seeded two regionally-focused single-tenant net lease vehicles: the Rasmala European Real Estate Income Fund, and the North American Real Estate Income Fund.

Ruggiero Lomonaco, fund manager of the Long Income Fund at Rasmala, said:

“The recapitalisation and rationalisation of the portfolio will position our Long Income Fund for the next phase of growth. We continue to believe in the attractiveness of single-tenant net lease assets as a source of alternative income, which can grow in line with inflation.”

Notes (and pics) of recent site visits in Europe-Commercial Real Estate Sector

Commercial Real Estate Sector

13 April 2023

During the last few weeks I travelled to both the UK and Continental Europe to have a better understanding of what is going on in the Real Estate sector. Now, having received most of 1Q24 valuations of the Commercial Real Estate properties in which we invest, I thought it would be useful to share some notes (and some pics) of my trip.

Before I go into the details, here are my conclusions.

  • Commercial Real Estate is going to deliver substantially higher income than investment grade fixed income (by an order of 200 or 300bps) but at a cost of substantially lower liquidity.
  • Large-cap REITs will be the preferred route for private investors to CRE. Small cap REITs will be taken over by larger REITs (or taken private by Private Equity investors).
  • Offices and traditional Retail properties are not coming back as Core assets. They will remain the preserve of sophisticated investors.
  • The spread trade (borrowing to boost income) is over. CRE has become an asset class for patient investors who are prepared to collect growing income over a long time horizon.
  • Value-add and Opportunistic Funds will have a tough time to give an exit to their clients as the pool of Core investors has shrank.  

First stop: London, Budget Hotels

My first stop was in Kingstone Upon Thames, southwest of London, where we are invested in a Travelodge Hotel (I actually checked in at this hotel for one night as part of my site-visit).

Budget hotels on long leases are currently trading at an attractive yield, having de-rated substantially during the COVID pandemic.

The high yield reflects the risk of tenant default, as in the case of Travelodge which wasn’t able to pay its rent during the pandemic and then forced many landlords to accept a restructuring of their leases.

I would also add that these high yields may also signal an increased depreciation of the asset and the need of extensive refurbishment upon expiry of the lease. To compensate for the lack of business and tourist travelers, some operators have decided to make properties available on a short term basis to the housing of refugees, something which has lowered dramatically the investment in the upkeep of the property.

Overall, these assets are trading well above 10 years UK gilts with yields ranging from 6.7% to 8%.


Day two: Dorset, Supermarkets

Next day went to see the Asda in Gillingham, another asset in which we are invested. The journey was a bit of an Odyssey, with an Atlantic storm in full swing, and 4 lanes motorways of London eventually becoming single alternate lane in the lovely British countryside (I even passed by Stonehenge!).

Supermarkets form part of the basic infrastructure of any urban area and represent a reliable source of long term income for landlords. In the “race for space” of the ’90s, many operators entered into sales and leaseback of their assets to expand their footprint, creating a different way to invest in the Retail sector.

Following the COVID pandemic, when Supermarkets became highly sought-after properties generating secure income, the asset class has derated.

Various explanations have been given. Initially, open-ended funds and insurance companies started selling Supermarkets to raise liquidity since their Offices and Shopping centres had no buyers.

Subsequently, a number of Asda and Morrison stores were put in the market by their over-levered owners as a way of raising cash.

More recently, market commentators have started to notice that the spike in inflation has pushed contractual rents above market, impacting the residual value of the properties.

Whatever the cause may be, UK Supermarkets now offer yields well above 10 years UK gilts, and with their inflation linked leases, represent a very good source of income with yields ranging from 5.25% (prime) to 8% (secondary/overrented).


Day three: Retail Parks

The next leg of the journey took me up North to Doncaster where we are invested in a Retail Park leased to multiple tenants like Aldi and B&M.

These assets have also proven quite solid during the pandemic as they were easily accessible and able to accommodate online sales.

Valuations have been quite stable because they were late to the party (being Retail assets) so they never traded at premium levels.

Looking at the CBRE Q1 yield guide, we can see that there is a big spread between prime and secondary yields, ranging from 5.25% to 8%, but overall the trend is stable.


Missed stop: the Netherlands

The Dutch leg of the journey was cancelled because one of my colleagues happened to be there and went to visit our properties on my behalf. Nevertheless I managed to speak to the CBRE team in Amsterdam to get an update on the market.

In the Netherlands we have an R&D laboratory in the bio-science park of the University of Leiden and two logistics warehouse leased to Timberland Europe in Almelo (one of which is under construction).

The Dutch CRE market is extremely illiquid at the moment, with any property put on the market receiving bids at which sellers are not prepared to trade. Which explains why volumes are so low.

We have received two valuations of the R&D laboratory from JLL and CBRE, both of which confirm that the resale value of the property is in line with the purchase price paid in 2020. We also performed a theoretical valuation using a discounted cash flow model and noticed a striking difference between the present value of income (much higher) and resale value.

R&D laboratories are gradually becoming a distinct asset class from Offices, with some specialist funds deploying capital in the sector. However, with the indiscriminate search for yield having come to a halt, pricing of secondary market transactions is going to be impacted by the overall dynamics of the Office sector which is going to cap capital growth.

However, since these are operating assets for their tenants (they can’t easily move their R&D to another laboratory), the security of the income is high, warranting an allocation in a CRE portfolio.


Modern logistics assets are in a slightly different dynamic. Having traded at a premium relative to the CRE market, they have corrected substantially until yields reasserted a positive spread relative to investment grade bonds.

However, liquidity to the asset class has not returned because lending spreads have expanded to 2-2.5% and leveraged buyers can’t afford the loans.

This state of affair is keeping a lid on capital growth, but preliminary indications are that at least capital values have stabilized.

Rental yields at these levels signal that the market expects both income and capital growth in the long term, with logistics primed to deliver superior returns even in a high interest rate environment.

Timberland Almelo - Lemo KoepelsImage_2024-04-13_06-58-51_1

Final stop: High Tatras, Slovakia. Luxury Hotels

Finally landed in Vienna and headed to the Grand Hotel Kempinski in High Tatra, Slovakia to catch the last snow of the season.

Admittedly this was a personal trip, but it gave me an opportunity to confirm that luxury hotels remain a coveted asset class to preserve value over time. Occupancy is very high and daily rates at the top of historical ranges. Really a parallel economy.

This is not an asset class in which our Fund invests, however if you are interested I suggest you have a look at Marriott and Hilton to gain indirect exposure to the asset class.

If you wish to own luxury hotels in Europe one way is Covivio Hotels, a little known listed company affiliated to Covivio. Bear in mind, however, that Covivio intends to acquire all shares of Covivio Hotels because the sector is doing very well and they wish to own the entity in its entirety.


Notes (and pics) of recent site visits in the UK – Residential Sector

UK - Residential Sector

22 March 2024

Last week I visited multiple development sites in London, Manchester and Birmingham, and spoken to a number of local developers to have a first hand view of what is happening in the UK residential sector.

If you are looking at this sector, I thought it might be useful to share my impressions (and few pics). Happy to meet in person or arrange a call if you wish to discuss in more details.

Housing shortage

This is an election year in the UK, and Housing is a big topic. In general, there is little understanding within the general public as to why property prices have increased so much in the UK to the point that they have become unaffordable to the majority of new buyers.

I remember when I was living in Stratford, London in the ’90s that it was possible to buy a terraced two bedroom house for £24,000 (less if it required renovation). Today one would be lucky to buy that same property for less than £400,000.

In a world of “fiat money”, where central banks continue to expand the monetary base and the banking system continues to create credit (in this case by making available mortgages with 90-95% LTV), it is inevitable that house inflation will appear.
And there is no sign that this is going to change, with some proposals for 99% LTV mortgages floating around (then withdrawn).

Add to this, that the population of the UK continues to growth (not only through immigration which BREXIT has not stopped), and the only solution to this issue is to build more houses. But where?

Let’s see what I found out.

London – Kingston upon Thames

I visited a place called Kingston upon Thames, which is one of the borough of London where our Long Income Fund is invested in a Travelodge hotel.

Since I was there, I took the opportunity to walk around which (as the name says) is right upon the river Thames, a magnet of “brownfield” regeneration over the last 30 years.


I wasn’t surprised to see the usual contrast of old terraced houses and new waterside apartments with lovely canals and a very pleasant promenade along the river which must be very appealing to young professionals who didn’t make it in the first way of development of “canal-side” living. Lot’s to demolish and rebuild in this part of London.

Also an excellent area for our Built to Rent strategy, given the good rail connection to the Centre and relative affordability of rents versus central London.

Whilst there, this news caught my attention:

RER London has launched the sale of the former Surrey Country Hall, a Grade II-listed building, after obtaining approval for a £250m redevelopment. The company, owned by Tim Farrow, bought the site in 2021 and has plans to convert it into a residential-led, mixed-use scheme with around 350 homes. The building, which sits on a 5.2-acre site, is being marketed by Levy Real Estate and Savills.Surrey County Council sold its former headquarters to RER in 2021 for over £20m.

Nice upside for the developer 🙂

London – Chancery Lane/Commercial Street

Next day I checked in at our latest addition of our UK Multifamily Portfolio, a block of 14 luxury flats managed by Viridian Apartments. To make sure I had the best views, I checked in apartment 14, 116-118 Chancery lane, which has an amazing rooftop terrace, overlooking King’s College.

If you ever visit London, let me know and I will see whether we can book you here.


Serviced Apartments are a very cyclical business, with the Jan-Mar period one of the worse (hence why I could easily check in at Chancery Lane). Hopefully, from next month, things will start to improve as they usually do in Spring and Summer.

Our colleagues at Viridian Apartments (which I am happy to report has now been fully acquired by our UK Multifamily Fund) never stop looking at ways to improve our portfolio. Whilst there, they were working on a new 38 units block in Commercial Road (here is my colleague Anna and her team making sure that this property looks stunning).


Whilst there, we shared an iftar with our Cur8 Capital partners at Lahore Kebab House which brought me memories of my days living in East London. What a change this area of London has undergone! And how much more to develop!

East London and the South Bank of the river Thames was historically one of the least desirable areas of London (I ended up there because I was working for JP Morgan at that time, and for some reason the bank had an office within the Stratford Shopping Centre, go figure).

As such, I saw with my own eyes how century old abandoned industrial revolution era warehouses, Victorian river docks and Council government estates were progressively transformed in desirable places to live, work and play (just think of Canary Wharf, the South Bank etc).

And the process continues to this day, with the City continuing to expand east-wards, encroaching in the old estates of Brick Lane, Whitechapel and Commercial Road.

Plenty of opportunities here.


Next day I moved to Manchester to visit some new sites where we would like to acquire. It is the second time I am visiting the city in the last 6 months, so I was not surprised as much as I was last August.

During the Covid pandemic, the local municipality had the brilliant idea to relax planning permissions and let developers construct high rise buildings. Today, Manchester is quickly transforming into a modern city, attracting young talent (or better retaining them, since they have some of the top universities in the Country). Even Goldman Sachs has opened an office here.

Whilst there I stayed at a small hotel owned by one of the investors in our UK Multifamily Fund to explore the possibility of demolishing and rebuilding a 40 stories tower on the site.

I also went to see an area called Salford Quay, which looks very much like the Docklands in East London and has witnessed a remarkable wave of residential developments.

Our Long Income Fund for a while invested in the freehold of this property benefiting from a 250 years ground rent.


What is remarkable, is that in this city there still so many derelict buildings like the one below just waiting to be demolished and rebuilt. Like this one in Devonshire Street.



My final stop before returning to Dubai was Birmingham.

The city is a bit behind Manchester in its regeneration, but on a good path. It does not help that the local municipality went bankrupt as a result of a labour dispute. In fact, as I was inspecting few sites I passed near the City Council building and I saw movers and packers taking away furniture before the building itself is sold to be demolished and converted in a new residential high rise building.

Something which I found remarkable is how many student housing blocks have been developed here.

We have been investing in the student housing sector for few years and are quite aware of the risks. Essentially, the Government has capped the fees that Universities can charge to UK students, without providing necessary funding to the educational institutions.

In response, UK universities have aggressively opened up to foreign students, which has required an improvement of the quality of student housing (now essentially a hotel room). The Chinese contingent is quite numerous, and primarily located in the Chinatown area.

Being in an election year, and in the midst of a shift of geo-political equilibria, any move by the Government to limit the number of study visa, the ability of foreign students to bring their parents or of staying in the Country to look for a job, will be detrimental to the sector.

Nevertheless, the vast majority of students are British and their number is set to increase for the next 10 years due to a specific demographic pattern.

The most impressive property I saw right in the middle of town. 1000 rooms fully occupied, flanked by other fully occupied developments owned by the like of Unite Students etc.


And in the background, a high rise residential tower part of the changing landscape of the city.


Fan fact

Including site visits to our commercial properties, I visited 6 cities in 7 days, driving about 1000 km.


Rasmala Announces Acquisition of Cove Rotana Resort in Ras Al Khaimah – Press Release

Rasmala Announces Acquisition of Cove Rotana Resort in Ras Al Khaimah


Dubai, June 3, 2024: Rasmala Investment Bank Limited (Rasmala), a leading alternative investment manager, announces that it has successfully advised Cove Resort Holdings Limited to acquire the Cove Rotana Resort in Ras Al Khaimah, UAE. Cove Resort Holdings Limited is an ADGM-based special purpose vehicle, wholly owned by Mr. Saqr Kamal Hasan.

Orascom Development Holding, the seller, built this five-star beach resort consisting of 349 rooms in 2009. This top-tier resort is famous for its 600m-long private beach, upscale dining, and exquisite facilities.

This acquisition comes at an ideal time as Ras Al Khaimah is becoming a key player in the UAE’s tourism and investment sectors, propelled by strong economic policies and promising growth forecasts. This acquisition is perfectly timed to capitalize on the exponential growth expected in Ras Al Khaimah’s tourist arrivals over the next 5 years.

“The successful signing of this agreement marks a significant milestone for all parties involved and opens a new chapter of growth and opportunity,” commented Ali Taqi, Chief Investment Officer at Rasmala.

Cove Resort Holdings Limited is an ADGM domiciled special purpose vehicle, wholly owned by Mr. Saqr Kamal Hasan, a prominent UAE based businessman and investor. Mr. Hasan conveyed his enthusiasm regarding the acquisition: “We are delighted to welcome The Cove Rotana Resort into our esteemed portfolio. This property represents more than a resort; it’s a testament to unparalleled luxury and service. Its world-class amenities and breathtaking views perfectly reflect our dedication to providing exceptional hospitality experiences.”

Cove Resort Holdings Limited is an ADGM domiciled special purpose vehicle, wholly owned by Mr. Saqr Kamal Hasan, a prominent UAE based businessman and investor. Mr. Hasan conveyed his enthusiasm regarding the acquisition: “We are delighted to welcome The Cove Rotana Resort into our esteemed portfolio. This property represents more than a resort; it’s a testament to unparalleled luxury and service. Its world-class amenities and breathtaking views perfectly reflect our dedication to providing exceptional hospitality experiences.”

This acquisition builds on Rasmala’s expertise in originating and structuring direct real estate investments for its clients. This transaction is expected to close by September 2024, subject to the satisfaction of certain customary closing conditions.


For more information, please contact:
Rasmala Media
+971 4 3635600


About the Rasmala Group

Rasmala Group is a leading alternative investment manager operating in global markets since 1999. It invests directly and alongside Gulf-based institutional investors including banks, pension funds, endowments, family offices, corporations, and government institutions. Rasmala Investment Bank Limited (RIBL) is based in the Dubai International Financial Centre and regulated by the Dubai Financial Services Authority (DFSA) and is a wholly owned subsidiary of the Rasmala Group. For further details, please visit

About Cove Rotana Resort – Ras Al Khaimah, UAE

Located about 8 km from the center of Ras Al Khaimah and 20 km from Ras Al Khaimah International Airport, the Cove Rotana Resort is a five-star property offering a lavish experience with breathtaking views of the Arabian Gulf. The resort spans approximately 289,955 sqm and features 600 meters of pristine beachfront. It boasts 429 keys, including 349 rooms and 80 luxurious 1, 2, and 3-bedroom villas, catering to both families and groups. The resort’s amenities include multiple dining options, three meeting rooms, a gym, five swimming pools, and a comprehensive wellness center with four spa rooms.

About Cove Resort Holdings Limited

Cove Resort Holdings Limited, wholly owned by Mr. Saqr Kamal Hasan, a distinguished businessman with extensive background in the banking industry coupled with a rich family heritage in the hospitality sector. Mr. Hasan has successfully leveraged his expertise to acquire strategic investments and drive growth. His deeply-rooted understanding of the hospitality sector, inherited from his family’s longstanding involvement, has enabled him to excel in luxury hospitality investments. His strategic vision and leadership continue to make a significant impact in both the banking and hospitality industries.

International Real Estate – Strategy Update May 2024

In this note I will try to answer the following questions:

  • Have Private Real Estate markets reached a bottom?
  • Are Public Real Estate markets still more attractive than Private Markets?
  • Is it possible to offset withholding taxes and boost the yield of REITs?
  • Is there a turn of fortunes in Logistics?

Before we start, I would like to share our new dedicated Real Estate Investments Portal, providing information about our strategies and access the latest insights. Feel free to register at:

Have Private Real Estate markets reached a bottom?

During the first quarter of this year the Green Street US and Pan European Commercial Property Price Indexes (CPPI) were relatively unchanged relative to the year end mark, prompting many analyst to declare that the bottom of the cycle in Commercial Real Estate is here.

There seems to be a consensus that interest rates have picked, and that Commercial Real Estate has repriced enough to be attractive relative to fixed income. Even the Retail sector has returned in the radar of strategists (and brokers), who have noted that capital values have stopped falling and the yields are extremely attractive.



Pan European CPPI


The reality from the ground is a bit different.

As owners of Commercial Real Estate, we continue to see a wide disparity between the theoretical value of our assets calculated using a Discounted Cash Flow model and the value based on market comparables which prevent us from putting properties in the market for fear that bids will come substantially lower than our expectations.

Like us, many owners of Commercial Real Estate are refraining from selling assets leading to a substantial drop of secondary market liquidity.

The above-mentioned Green Street CPPI represents the theoretical price at which a buyer would be willing to acquire an asset, based on a multitude of market variables (including liquidity). However, if there are no willing sellers, there will not be a transaction at those levels, so essentially the index just tells us that buyers have probably stopped lowering their bids.

The following chart provided by Aberdeen Standard using data from Green Street illustrates the point:


The black line (INREV CV) represents the price at which Commercial Real Estate properties in Europe have transacted. The blue line (CPPI) is the above-mentioned Pan European CPPI Index.

As you can see, there is quite a big gap between the level at which most of the liquidity is found (CPPI) and the level at which transactions are occurring (INREV) leading us to believe that at present, only a small fraction of properties is transacting between motivated sellers and buyers with extremely long investment horizons able to see through the current inflection point of the market.

The dotted line provided by Aberdeen Standard shows their expectation that over the course of this year buyers and sellers will eventually agree on the value of real estate and liquidity will return to market. In a way both parties will reach a compromise, with sellers increasing the price at which they are prepared to buy and buyers increasing the price at which they want to sell.

If this expectation is correct, 4Q24 will probably be the real bottom of the cycle from which we could see capital values increasing again.

What could go wrong? Interest rates could remain elevated, further delaying the meeting point between buyers and sellers. We have seen this happening in 2023 (remember 4Q23 was expected to be the bottom of the market), and we should not be surprised if it happens again.

Stress could also appear in the market as banks work through refinancing of existing loans. The longer interest rates stay high, the greater the number of transactions that will become under pressure requiring a forced liquidation.

Are Public Real Estate markets still more attractive than Private Markets?

At the end of 2022 and again at the end of 2023 we noticed the stark divergence between public and private real estate markets, with public markets relatively more attractive than private markets.

This is exemplified well by the chart below comparing the NCREIF Index (private markets) with the FTSE NAREIF US REITs index (public markets).

Our call to go all in on REITs and Housebuilders worked out well in both 2022 and 2023, especially in the UK where in addition to equity gains we benefited from currency revaluation gains.

As you can see below, the value of listed real estate (at least in the US) has moved above private real estate leading us to change our positive stance for REITs.

Nevertheless, we see some specific opportunities in the REITs space which could deliver returns superior to private markets. Feel free to reach out if you wish to discuss.


Is it possible to offset withholding taxes and boost the yield of REITs?

With the undervaluation of REITs broadly corrected, we are now focusing on boosting the yield of our portfolio.

REITs are a tax efficient vehicle for domestic investors who can receive their dividends gross. International investors are usually subject to withholding taxes ranging from 20-30% which greatly reduce the merit of a permanent allocation to the asset class.

Within our portfolios we implement strategies to boost the yield of REITs generating additional income which compensate the tax leakage.

The strategies make use of our Shariah structure which enables us to monetize the volatility of securities boosting their return. In return for boosting yield, we need to sacrifice some of the upside from further property appreciation.

But given our view that most of the upward revaluation of REITs market has already occurred, we are happy to give up some of the upside if we can boost the yield from 4% (net) to 8-10% (net).

Feel free to reach out if you wish to discuss further this topic.

Is there a turn of fortunes in Logistics?

Market participants were caught off guard recently when Prologis announced that they had observed declining rents in the US Logistics sector. The repricing of Logistics assets from yields of 7-8% (2010) to around 5% was predicated on the ongoing technological transformation underpinning Logistics demand and perpetual rental growth. What about if that growth is negative or flattens out? Should Logistics be repriced again to 7-8% like Offices and Retail?

Below is one of the slides that worried the Market. A rise of vacancy rates is a big worry in real estate because it gives more bargaining power to tenant and caps rental growth.


Markets promptly derated Prologis shares which fell 25% to just above $100 taking the pick to through drawdown to 45% from the pick of March 2022 when the shares were trading at just above $170.

Interestingly we saw this coming 2 years ago (link here and recommended selling Prologis. But now we see an interesting case in both owning Prologis and investing in logistics.

In doing this, we adopt the thesis of CBRE which recently went on a charming offensive separating what they call “Legacy Logistics” from “Modern Logistics”.

CBRE accepts the headwinds to the Logistics sector caused by factors like unaffordable rents, increase cost of labour, obsolescence etc. However, they point out that Modern Logistics displays certain characteristics which make the assets essential, e.g.:

  • Robotic retrieval
  • Automatic sorting and stacking
  • Interconnectivity with Electric Vehicles
  • High flow through.

Here is the link to the replay of CBRE webinar “The Future of Logistics”:

We are currently developing a modern logistics facility in the Netherlands which has been pre-leased by the tenant for 15 years, under a contract which entitles us to annual inflation linked reviews of up to 5%. Furthermore, the tenant is installing within our premises a fully automated sorting and stacking system costing more than the value of our property, giving us confidence that they will stay on these premises for a very long period of time. Irrespective of the fluctuations of Logistics rents, we should be able to earn a secure income.

This is how a modern logistics facility looks like. As you can see no more human-operated forklifts moving around pallets.


Fun fact: we have heard about robotic companies having developed humanoids powered by Artificial Intelligence working alongside humans in warehouses to learn and replace them. It feels like we are getting closer to the Singularity, with AI supplanting human intelligence…


Best regards

Ruggiero Lomonaco
Head of Real Estate Funds

UK Residential Investment Strategy – Update

With the policy rate decision of the Bank of England behind us (5.25% unchanged), speculation has started about whether the first rate cut will occur in June or July. Governor Bailey has not made any commitment, clarifying that it will ultimately depend on incoming economic data.

Real Estate investors have been waiting for rate cuts for more than a year, hoping that lower cost of finance will increase liquidity and reignite capital growth.

Inflation has come back substantially from the pick of almost 10% touched in October 2022, but fears abound that the last mile (i.e. reaching the 2% inflation target) might be the hardest. Several factors are at play here, from labour shortages, war in Ukraine, tension in the Middle East, reshoring of production and energy transition.


The UK 10 year Gilt certainly reversed the positive sentiment prevalent at the end of last year, and quickly repriced from 3.49% to 4.14%.


The UK residential property market is the mirror image of the persistent high inflation and high interest rates, with rents continuing to rise and property values decelerating.

According to the Office of National Statistics, average UK private rent increased by 9.2% in the 12 months to March 2024, representing the highest percentage change since the UK data series began in January 2015.

Average UK house prices decreased 0.2% in the 12 months to February 2024, an improvement from the decline of 1.30% in the 12 months to January 2024.


As usual, it is useful to show recent house price changes in the the wider context, to appreciate how resilient the asset class has been:


In their latest Q1 2024 UK Built to Rent (BTR) market update Knight Frank noted a record first quarter for BTR investments which hit £1.3 billion, up 21% over the year, the highest figure for a first quarter.


Quoting from KF’s report: Strong operational performance, ongoing investor demand and an expectation that rental growth is moderating to a more sustainable long-term position all support a view that yields will be stable through 2024. In total, the number of deals completed in Q1 across the UK market was up 55% over the year, while the average deal size was down 22% to £75.8 million.


The UK’s BTR stock now stands at 109,803 completed homes with a further 63,240 homes under construction and 80,400 with full planning permission granted. This brings the total size of the sector to 253,443 homes completed, in development or with planning.

There are 5.7 million privately rented homes in the UK. Current institutional BTR supply caters for just 1.9% of that number, rising to 3.0% when you include what is currently under construction, highlighting the scale of the opportunity for investors. This supports  view that the UK has considerable scope for growth.

Based on current household growth projections, Knight Frank estimates that there will be an additional 263,000 households renting properties by 2030 . If  the BTR sector continues to add around 14,000 homes each year, as it currently does, the provision rate would only increase from 1.9% today, to 3.4% by 2030, underscoring both the need and the potential for significant continued growth in the sector. 


10-15 years ago we saw the birth of the Purpose Built Student Accommodation (PBSA) sector. Today, we are seeing the birth of another sector “UK BTR”, a sector which will dwarf in size PBSA and rival other traditional commercial real estate sectors of Offices, Industrial and Retail.

Contact our team

For more information or to speak with our Investor Relations Team at +9714 363 5600 or +9714 424 2700

Prices and Dividends – May 2024