• The presentations addressed the perspective by institutional investors and how they will begin a long process of investing in alternative assets, a vision regarding the different types of real estate assets in Chile, and the perspective of real estate as an investment asset and complement to a portfolio of traditional assets.
What can we expect from the 2020 real estate market? was the question that was articulated at the presentations by Miguel Gravet, Manager of Alternative Assets Investments of AFP Capital, Víctor Guevara, Director Real Estate of SURA Investment Management, and Daniel Soto, Chief Strategist of SURA Asset Management Chile, in a context in which the AFPs, including AFP Capital, have a powerful investment plan in alternative assets, where the real estate market plays an important role.
Miguel Gravet referred to the benefits and opportunities of investing in alternative assets, showing as an example the Canadian pension funds, which have invested more than half in alternative assets, and 21% of those investments are in the real estate market. In this sense, the increase in the investment limit for these assets defined by the regulator is welcomed, however, Chile is still far from real estate investment levels such as the Canadian one, although according to the specialist, this shows a trend that we can continue with regard to buildnig portfolios.
"At AFP Capital, we believe that some of the advantages for institutional investors in real estate assets lie in their contribution to diversifying the portfolio, offer protection against inflation, and also allow a high level of leverage since they have mortgage guarantees that allow them to borrow in order to acquire new assets, ”said Gravet.
As to AFP Capital, the team of specialists continues to increase. “We want the steps we are taking in alternative assets to be firm and we are all aligned in the construction of the program. This is a key project for AFP Capital because it aims to raise affiliates' pensions in the medium term,” he assured.
In turn, Víctor Guevara shared SURA Investment Management's viewpoint regarding each type of asset that the local market offers, where the segments of office leases have a higher presence, whose vacancy levels have dropped accompanied by an increase in rental prices, and which are particularly challenged in the context of Covid-19 by the increase in teleworking. However, the director of acquisitions, in charge of purchasing real estate assets in Chile, does not necessarily see the rise in home office as a threat to the office market since the leases are under medium-term contracts. So, while it is a change, this will take place gradually.
As to the industrial market, he describes it as "a segment with high demand, decreasing vacancy and future warehouse production below last few years". In this sense, we can see an opportunity in this segment, associated with the increase in e-commerce, and the need for product storage.
Finally, Daniel Soto referred to how real estate can be efficiently complemented with traditional assets to diversify the portfolio, ensuring that, in a balanced risk portfolio, real estate investments should represent close to 20% of the portfolio. On the other hand, he pointed out that house prices have followed the profitability of other assets such as equities and fixed income, however, the return on real estate investment has lower volatility than IPSA and is closer to that of fixed income.
Regarding the current situation of the markets and their impact on current investments, the head of the Investment Strategy points out that “real estate funds in Chile which have mainly commercial properties and are being traded below book value. We see this as an opportunity in the long term as we believe that the prices of these assets should continue to tend to rise. We do not see a central scenario in which the price of real estate assets falls and, on the other hand, nor do we see that the flow capacity of these assets has finally deteriorated significantly in recent times. Obviously, there will be some stress due to the situation we are experiencing, but in the medium and long term this should tend to recover as it has happened other times in the past.”