Patrick Kanters

It is four weeks since Patrick Kanters settled into his seat as INREV Chairman. He begins his tenure as Europe’s economic crisis deepens, and with it, the real estate downturn. However, in such a challenging climate, Kanters talks about his strategy to ensure the non-listed funds sector continues to evolve in tough times.

On the day that Patrick Kanters was being sworn in as chairman, a news story was breaking on the real estate wires that underlined the reason why Kanters, Managing Director of Global Real Estate & Infrastructure at APG Asset Management, had been a wellreceived choice for the chairmanship at INREV.

The non-listed industry is still new, around fifteen years old and INREV has been around for much of that time.

That day, APG – where Kanters oversees all of the firm’s real estate activities – announced it would further expand its worldwide reach, with a strategy to increase its investments in Asian property.

Investing in Asia is nothing new for APG; the firm has been building a portfolio in the region since the late nineties, and has invested H900 million there in the last two years. But it is now seeking to increase its exposure to the housing sector of fast-growing countries such as China and India.

It is this evolutionary approach that INREV’s members can expect to see reflected in Kanters chairmanship. The long-time member of INREV – who has been involved in the organisation since 2003 – has its development at the forefront of his agenda, and believes that now is the time to build on the important work INREV has undertaken over its nine-year history.

As the man responsible for a global portfolio of H26 billion – Kanters is well placed to think big. “APG is a truly global investor, so hopefully I can be instrumental in this respect going forward,” he says, adding that his key aims are to further promote a uniform standard language and standard methodology of valuation, not only in Europe but worldwide.

As an investor in publicly traded real estate companies as well as private vehicles, funds and co-investments across the globe, Kanters is able to recognise the positive changes INREV has effected in the non-listed industry, as well as the factors the sector needs to address to be competitive going forward.

“The non-listed industry is still new, around fifteen years old and INREV has been around for much of that time. If one compares the amount of information the industry has today with what it had seven years ago, great progress has been made. Investors can now ask questions they would not have done before, especially in recent years,” he says.

There were no fund level benchmarks before, and now they are established.

Kanters says he is “very proud” of the benchmarks that INREV has established for the non-listed sector. “There were no fund level benchmarks before, and now they are established. The INREV Guidelines were originally established for Europe, but they are already being applied on a global scale. That is an absolutely terrific achievement,” he says.

Building on those foundations, Kanters is keen to take INREV’s work to a wider audience, further promoting the Guidelines by enabling them to develop towards being global standards. To that end, Kanters is particularly excited by INREV’s collaboration with ANREV in Asia and says that transplanting the guidelines to other regions has not been as difficult as one might think.

Further developing transparency in the non-listed sector is another strategic aim. Kanters is looking forward to the outcome of recent initiatives such as the white paper on the Standard Data Delivery Sheet, aimed to improve the efficiency and transparency of information flow between investors and fund managers. The paper, which was launched in April, marked the start of a threemonth consultation phase during which INREV is seeking feedback from members.

INREV published its first Sustainability Reporting Recommendations in January in an effort to help non-listed property fund managers determine the data they should be reporting to investors.

Sustainability is another key priority, an issue close to his work at APG. The firm has together with PGGM, Maastricht University and the Universities Superannuation Scheme, created the Global Real Estate Sustainability Benchmark (GRESB) – an initiative to assess the environmental and social performance of listed and non-listed real estate investments, which INREV also supports.

Kanters believes INREV has done good work in this field. INREV’s published its first Sustainability Reporting Recommendations in January in an effort to help non-listed property fund managers determine the data they should be reporting to investors. But he says that this topic will only become more important going forward.

The role of sustainability is considered less and less in isolation, but increasingly as an important element in judging a fund manager.

“The role of sustainability is considered less and less in isolation, but increasingly as an important element in judging a fund manager. It is a very important element in making a fund a success. Every fund manager and joint venture sponsor needs a proper sustainability policy today – both for short term and long term strategies.”

To this end, INREV hopes to use research from GRESB to make a connection between fund performance and sustainability. “Joining forces will help sustainability going forward and bring investors and fund managers together,” Kanters says.

“We are way past the point that more sustainable real estate involves higher costs. Improving the level of sustainability of your investments actually increases their value. It will cost if you are not sustainable.”

Collaboration is another priority for Kanters this year, and he aims to foster deeper working relationships with other industry bodies overseas, especially in the US – such as NCREIF and PREA.

Kanters believes INREV’s work in relation to transparency and benchmarking, which is “way ahead of most other alternative investment classes”, could also be used by fund managers in other sectors. “Many of INREV’s standards might be applied to other investment classes. This is something that we are looking at APG, in terms of infrastructure for example. A lot can be learned from the work of INREV,” he says.

The advent of new fund formats such as joint ventures and coinvestments are a key trend for 2012 that INREV will be working on over the coming months as is the debt funds sector with an increasing number of products covering exposure to senior, mezzanine, distressed and non-performing loans.

As Kanters explains: “Given the still very challenging economic environment, the vast majority of institutional investors are still extremely cautious. It takes time to find the best opportunities. They are looking at ways to invest their money through real estate – maybe through funds, or some might want to invest in smaller joint ventures or co-investment. INREV can play a role in showing the investor flows into these investment structures.”

The real estate market is evolving and my priority is to expand INREV’s coverage over a broader range of products such as co-investment, joint ventures and debt real estate vehicles.

Kanters argues not enough is understood about these newer routes into market, including what capital they are attracting, neither are there workable definitions for some of these arrangements. “The real estate market is evolving and my priority is to expand INREV’s coverage over a broader range of products such as co-investment, joint ventures and debt real estate vehicles,” he says.

INREV, he says, should therefore play a role in researching investor flows into these other investment structures, and comparing what makes these structures different. “It is difficult to come up with definition of a joint venture for instance, so this is one area of enquiry. We also need to get a better feel for them and bring those differences to the table. It is very much about getting a better understanding.”