Public Real Estate

RE01
Lecture 12: Real Estate Securities

Thies Lindenthal / Colin Lizieri
htl24@cam.ac.uk

February 2023

Putting things into perspective
What are we talking about?

Total UK real estate is worth £8-9trn. Market cap all companies listed on LSE: £3.8trn. Investable RE: £1trn (54% held by investors).
REITs held ~£96bn in 2020.

## No control <span class="subtitle"><br>Church of England lost 40 million—and reputation—in property deal</span>

* Peter Cooper Village and Stuyvesant Town are were sold to consortium led by Tishman Speyer / Blackrock for $5.4bn in 2006 (just before the GFC).
			-	Controlling partners had little equity in deal, aggressive gearing + institutional money (CalPERS, CoE, ...)
			- Debt burden too high, aggressive attempt to raise rents did not succeed, foreclosure. Investors lost invested funds—and potentially more.
		* CalPERS, America’s largest pension fund, terminated BlackRock after disaster

Notes:

* If the asset had been owned directly and entirely by the Church Commissioners, they’d have not geared up as aggressively, and they might have been able to weather the GFC (bear in mind when the consortium acquired the asset). Whether this is down to their partner / consortium selection (i.e. poor cultural alignment) or specifically a lack of (or at least reduced) control is debateable, though worth noting that the two things are not mutually exclusive. Wherever you land in that debate, its clear that the consortium leaders took the vehicle in a direction that the Church wouldn’t go naturally with direct assets, and thus you can see that the Church had lost control.

* The church put its reputation in the hands of a partner / consortium, and lost control of it. Lots of veterans living in PCV, and were treated badly (which carries a huge reputational penalty that goes beyond the usual rep risk of mistreating customers / residents / tenants). Though I’m sure you’ll find examples where people might say otherwise, generally speaking the Church tries to be a ‘compassionate landlord’ that ‘does the right thing’ when managing directly owned assets. Same cannot be said re: PCV.

RE01Lecture 12: Real Estate Securities

Putting things into perspective What are we talking about?

RE01
Lecture 12: Real Estate Securities

Putting things into perspective
What are we talking about?