06/26/2013 | By Allen Kenney
Charls discussed the latest developments with the proposed Alternative Investment Fund Manager (AIFM) Directive and its importance to REITs. The AIFM Directive was proposed by European regulators to oversee private equity investors and hedge funds. As local governments have started to implement the directive, questions have arisen as to whether it applies to REITs.
“It’s obvious that REITs should be nowhere near that group,” Charls said. “The leading players—France, the U.K.—seem to understand the situation. I don’t think there’s much of a risk that they will include REITs within the scope of the directive.”
Charls said concerns remain about how German authorities have interpreted the scope of the directive. In recent meetings with German officials, EPRA has been given the impression that the regulators will change their position, according to Charls.
“They are now more into the mode that they will judge companies on a case-by-case basis,” he said.
Charls offered his thoughts on the potential for the financial instability in Europe to create opportunities for listed real estate companies.
“Europe has gone through an important year in 2012,” he said. “We turned a corner. The listed sector is in a very strong financial position, which enables them to benefit from the most favorable conditions when they tap the capital markets. Because of all this, listed companies in Europe are now trading at par or at a premium to [net asset value]. Mainly where you see this is in companies that have strong positions in the big cities. Investors look for London, Paris, Berlin.”
As the fears of the financial crisis dissipate, opportunities should start to arise in secondary markets, too, according to Charls: “We think the listed sector will be in an excellent position to benefit from it.”
Charls singled out two key policy issues that are still in search of resolution. First, EPRA is working to ensure that listed real estate companies will be among the default options in the defined contribution retirement plan marketplace. Second, the European Union and Organisation for Economic Co-operation and Development is encouraging investors to seek out longer-term investments.