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Conducted by Mark Gately ’21
Ivo de Wit ’17 is CEO of Evolution Global Investors and has over 20 years of real estate investment experience across the world and a strong investment performance and ESG track-record. Over the last 10 years he was the Fund Manager of the global open-ended core+ flag ship fund of CBRE Global Investors, growing the fund since inception to one of the largest global real estate core funds. During his more than 20 year real estate investment career, he has worked in various regions around the world. In New York, Ivo was a Vice President and Head of US Strategy for Clarion Partners.
Ivo is an Adjunct Professor and Senior Fellow at Columbia Business School. Over the last 4 years he has been co-teaching an MBA course titled “Real Estate as an Asset and a Business” and has published papers in academic journals on performance drivers of real estate returns, international diversification and risk premiums of global real estate. His latest work is on the impact of international capital flows and investor sentiment on pricing of commercial real estate.
Ivo is a Co-Founder and Trustee of the City of Opportunities Charity that is funding and publishing research about the most important factors of the built environment that improves people’s health.
Ivo has a Ph.D. in Finance from Maastricht University and is a graduate of Columbia Business School and London Business School where he completed the EMBA-Global Americas & Europe program.
Please tell us about your first job in the real estate industry. Why did you choose to work in real estate and what is your favorite aspect of it?
During my graduate studies, I found real estate to be very interesting because it is a tangible asset. I ended up taking a job at ING, a real estate investment group that was looking to expand their real estate investments internationally. My first job was focused on market research and product development for the firm. ING was investing in their first non-listed funds of shopping centers in Spain and Portugal. We had 6 billion AUM and I was one of 30 people within the company investing internationally. I saw it as a huge growth opportunity because the Netherlands is obviously a small market, which means there is a limited amount of real estate. There were a lot of pension funds that wanted to invest, but the pool of assets was too small for the pool of pension fund money. Our group was one of the first to look at foreign investments.
Please tell us about your professional experience and the various jobs that you have held over the past 20 years. Is there one that you enjoyed more than the others? If so, why?
The job at ING gave me the opportunity to travel internationally rather than sit behind a desk. I was also tasked with creating and running a global allocation model for the firm. This meant that I was buying data from all over the world and then creating a model on how the company should invest worldwide. We were helping the company create an overall strategic framework. I really enjoyed the international aspects of the job and the fact that what we were doing was new within the industry.
After two and a half years I moved to New York City to work for Clarion Partners because I wanted more knowledge and experience within the US market. During that time, I obtained a PhD in global real estate investing. During my studies, I created a unique database which helped to analyze global risk premiums, inflation hedging and recommendations on how investors should make global allocations. I was conducting this work professionally as well as academically by publishing papers in academic journals. That gave me an authentic and exhaustive real estate education.
In 2010, I started working with CBRE in their London office. I was given the opportunity to set up their global fund. We started a fund that invested in all sectors around the world. It was initially for UK investors but quickly grew to involve European, Canadian, and Japanese investors. We successfully grew the fund from basically zero to $6 billion Assets Under Management in 10 years.
During your career you have worked in New York and London and have invested in real estate throughout the world. What are the major differences in real estate investing in the United States as compared to Europe and Asia?
Because real estate is getting more global, the differences are becoming less obvious. When I started my career, there were obvious differences since real estate markets were influenced by the culture, which they still are to a certain degree. In Europe, especially in northeast Europe you have more long-term investors. They invest with a buy-and-hold strategy. If something happens to the economy and/or markets they are not as quick to sell, which leads to more stability as compared to the US markets. We saw this during the global financial crisis. European markets didn’t decline as much as US markets, but the US markets saw a very quick correction. The European markets saw a valuation lag with a very prolonged correction. The US started to recover early in 2010 whereas European markets didn’t start to recover until 2011.
How do you look at different investment opportunities depending upon the fund’s strategy and mandate? For example, if you are investing for a value-add fund, what are some key characteristics or metrics that you look for that you wouldn’t look for if it was a fund that invests in core assets?
The fund that I was running at CBRE was more of a core plus strategy, with the majority of investments in core and some value-add investments. The core strategy is looking at the stability of the return and the stability of the income. The goal was to hit a certain income return that was stabilized from rent and rental growth. The value-add investments would look at deals that we considered “build to core.” In sectors where you didn’t have the right core product and couldn’t buy them, we would then look to create the right product. In a simple summary, for the core portion of the fund we would focus more on the property, its cashflows, and its tenants. For the value-add portion of the fund we would look more at the local market conditions and how we could get the best assets.
Obviously, the global pandemic has had a major impact on the real estate industry. What are some interesting trends that you have seen and what are some areas of opportunity for investing post-pandemic?
The pandemic accelerated trends in the market that we were already aware of, such as the demand for investment in life science and logistics assets. However, what is interesting is that pricing has remained relatively high and we didn’t see a decrease in pricing in these sectors but actually the opposite. In addition, there has been limited opportunity in distressed debt. This might be because of the amount of capital and liquidity in the global markets. Since the start of the pandemic there was and still is a lot of capital being committed, which you can see in the amount of fundraising that has occurred over the past year.
Has the global pandemic had a different effect on the real estate market in Europe then in the US and if so, what have you observed?
Both European and US governments have been hugely supportive, but the major difference is unemployment rates. In the US, unemployment rates increased whereas in many European countries it increased slower. Due to the larger social system, Europe focused on keeping companies in business which led to a slower rise in unemployment. Pension funds and large institutional investors have a lot of capital and have been able to continue investing during the pandemic. This has led to yields in some office markets in Germany to actually decrease over the past year. In the end you will probably see that there was a bigger impact in the US with higher growth during the recovery, whereas in Europe the impact will have modest, but prolonged growth.
During your EMBA block week course, Real Estate as an Asset and a Business, you had Lisa Cations ’17 from Hana as a guest speaker. Lisa spoke about the rise in flexible office space and the growing demand for flexible office space from some of the world’s biggest companies worldwide, as well as more locally driven demand. How does the increased demand for flexible office space affect owners and investors of commercial office buildings? Do you think having a flex office company as one of the building’s tenants is an amenity that can help attract other tenants, or do you view it as something that decreases the value of the office building? How should investors in commercial office buildings be thinking about this new trend?
I think, going forward, investors and office owners will have to view flexible working space tenants as a requirement. To me, what is interesting is that everyone thinks of WeWork when talking about flexible office space and the difficult time they’ve had over the recent past. Hana is different in that they partner with the owner of the building and make some part of it flex space, giving tenants the option of spillover space. When people go back to working in an office, employees most likely won’t be in five days a week, so companies will need buffer/flex space for certain days. In that scenario, having a flex space operator as a tenant would be an amenity.
In terms of valuation, it may be difficult to determine the NOI due to the uncertainty of flexible space tenants. Prior to the pandemic, the building would typically have a tenant in that space for a 3- or 5-year lease. With a flex space tenant, the cash flows will most likely be more volatile and less consistent. That might be a change for the traditional investors that look at property for the long-term cash flow.
You graduated from CBS in 2017, having participated in the EMBA Joint Global Executive program. Can you tell us a little bit about the program and about some of your favorite memories and experiences? How has the program helped you in your professional career?
For me, the program involved traveling from London to New York every other month. The Fund at CBRE expanded to include Canadian investors, so I was able to combine my trips for CBS with meetings in Canada. The global program gave me the opportunity to take electives in China and Hong Kong; this was especially helpful to see how things worked in different cultures and how I could apply that to the real estate industry. The program helped me learn about various cultures and important business practices in different geographic locations.
Finally, what would be your advice and recommendations for the students graduating from Columbia’s Business School this year looking to pursue a career in real estate?
I would recommend graduating students to apply their experience in other industries and look at trends that still need to happen in the real estate industry. The other thing I would recommend is explore the increased demand for alternative investments, such as student housing, senior housing, medical office, life science, and data warehouses. If you want to start somewhere, those would probably be the sectors to look at as they will most likely grow the quickest.
Mark Gately ’21 is a recent graduate of Columbia Business School where he received an MBA with a concentration in Real Estate Finance. He graduated from Villanova University with a B.A. in Communications and minors in Economics and Business. For the last 4 and a half years Mark worked for Taconic Investment Partners, a New York City focused Real Estate Developer. The majority of his work was heavily involved in the Essex Crossing Development on the Lower East Side.