REALX: Uncertainty reigns but too soon for distressed deals

(Top L to R) Richard Betts, Simon Mallinson, (Bottom) Daniel Harris, Jason Oram.

Looking ahead at the future of capital flows in Europe there is a lot of uncertainty, as much will depend on whether the pandemic is brought under control and travel restrictions are lifted, delegates heard at the ‘Capital flows – where is the capital heading?’ briefing held at RealX Global, the virtual trade fair organised by Real Asset Media.

‘Travel is a real issue now, because people need to see the asset,’ said Daniel Harris, Principal, head of European investments, Cain International. ‘For the next few months countries that have strong domestic markets will continue to perform the best, but from spring 2021 it will start to even out a bit more’.

Europe’s capital cities will regain their rightful place and London, in particular, ‘will go back to being a real winner’, said Harris.

Activity is likely to be muted until there is more clarity. ‘There is a lot of appetite for deals, but my prediction is that we’ll see a reduced level of activity in terms of capital flows, both direct into assets and into funds’, said Jason Oram, partner, Europa Capital.

Asian experience holds warning for Europe

The Asian experience has not been positive. ‘Capital will be slower,’ said Simon Mallinson, executive managing director, Real Capital Analytics. ‘There has been no recovery in investment volumes in Asia even after the end of lockdown, so that could be a warning to Europe’.

Investors want big discounts, even for core assets, he said, and they may be disappointed because so far prices have held and markets have been surprisingly robust.

‘We see a lot of capital-raising for value-add, opportunistic strategies, suggesting there is value-hunting in the market’, said Mallinson. ‘What has spiked so far is the number of assets that are potentially troubled, but as banks and landlords are giving more time there is no distress yet’.

There is a lot of capital expecting distress, but it may have to wait.

‘It’s too early to find distressed deals, they will emerge over the next 2-3 years,’ said Harris. ‘Debt is the place to look at, the most appealing at this stage of the crisis’.