CBRE has stated that while the UK’s decision to leave the EU “will prolong a period of unusual uncertainty,” the Brexit is unlikely to hinder investment volumes.
The comments came as Patron Capital raised a €949-million fund to target “distressed and undervalued investments” in Europe.
CBRE’s “The Long Goodbye” report warned that “imaginations will no doubt run wild,” but sought to reassure that “we are in the EU until we are not—and it will take some years to achieve an exit. It may not happen at all. The implications will take time to emerge and there will be inertia in the decisions businesses take, on a ‘look before you leap’ basis.”
The study acknowledged that this uncertainty was likely to affect UK investment prospects, because the UK (and London in particular) is an open economy with significant exposure to international capital flows. However, it said that the magnitude of the effect was very difficult to predict.
“The referendum result will prolong a period of unusual uncertainty for the UK economy and the hotels market more generally, and inevitably it will take some time for the full impact to be understood,” the company said. “In the short term, it is likely that some investors will defer decisions until they perceive greater stability; however, the slowing in UK hotel transaction volumes can also be attributed to the change in types of buyer and lower stock availability that has been evident in the market since the beginning of the year. The falling pound relative to the dollar and euro is likely to make UK investment opportunities seem particularly attractive to overseas investors.
“Dollar and euro denominated funds which have seen the value of their current UK property assets fall due to weakening exchange rates may be reluctant to sell. But cash buyers or those with secured debt are already expressing great interest in UK hotel acquisition. The low value of the pound may also make the UK more competitive, driving a ‘staycation’ trend and causing an increase in inbound travellers to the UK resulting in greater overseas demand for hotel accommodation.”
Patron Capital said the fund had exceeded its original target of €750 million, attracting investors from nine countries, with the majority of commitments coming from North America, followed by Europe, Asia Pacific and the Middle East. Investors included pension funds, sovereign wealth funds, endowments, foundations and asset managers.
The fund will opportunistically target distressed and undervalued investments, directly or indirectly related to property, across Western Europe. The fund will invest across a range of sectors in property-backed corporate investments as well as individual properties.
Around €164 million has already been deployed, with investments to date across office, residential and retail properties and corporate entities in the UK, France, Germany, Ireland, Portugal and Spain.
Keith Breslauer, Patron Capital’s founder & managing director, said: “With returns over our 17-year history averaging around 15 percent, we have proven experience of identifying opportunities and maximising value. The fact that we closed this fund in the lead up to and immediate aftermath of Brexit—and were significantly oversubscribed—highlights investors’ confidence in our ability to deliver strong returns in any economic environment.”