Lucy Fletcher has worked for Canadian global real estate investor and manager QuadReal since 2017 where she is currently Managing Director, Global Portfolio Management. She is a member of the INREV Investor Advisory Council (IAC) and has recently joined the INREV Management Board.
IQ talked to Lucy about why QuadReal have expanded their investments into Europe, what they are looking for, and what it means for them and like-minded investors to be part of the INREV community.
QuadReal is growing its commitment to European real estate, which now accounts for some 9% of assets under management, with the current strategy focusing predominantly on ‘sheds and beds.’ 'Our strategy is focused on research-based areas of conviction,’ says Lucy, ‘which means identifying the both cyclical economic shifts that can lead to imbalances in the supply and demand for real estate and growth sectors. This has led us to target private rented (PRS) residential in the UK, for example, a sector with strong underlying demographics that many investors have found difficult to enter. We are also keen on investing in global cities which also act as hubs of technological innovation such as Amsterdam – this is a city with diverse sources of growth.’
Our international expansion has provided higher risk adjusted returns as we have been able to use cycles tactically as no two markets move in tandem. The strategy is focused on core markets given their higher liquidity and generally greater resilience
This involvement in the European market has resulted from a conscious decision to diversify regionally. ‘Historically the real estate portfolio was heavily weighted to Canada,’ she explains, ‘but in 2016/2017 we changed the strategy to focus on international diversification and the identification of target markets. Our international expansion has provided higher risk adjusted returns as we have been able to use cycles tactically as no two markets move in tandem. The strategy is focused on core markets given their higher liquidity and generally greater resilience.’
While the QuadReal team invests in the domestic market directly through a vertically integrated structure, it usually works with best in class operating partners when investing outside Canada. ‘Historically QuadReal’s predecessor organisation used to invest in Europe via funds,’ says Lucy, ‘but we now favour the greater degree of control and collaboration that joint ventures can bring. Like all of our partners, we chose them for their local experience and track record, and alignment with our governance, particularly on ESG. Our partners are all sector specialists, which can give us an edge over those using more generalist managers.’
‘At the same time, it’s very important for us to have a physical presence in Europe, and we now have an office with 12 people in London. Having boots on the ground has proved essential with the travel difficulties of the last year or so, both for managing the portfolio and for generating new business.’
Like all of our partners, we chose them for their local experience and track record, and alignment with our governance, particularly on ESG. Our partners are all sector specialists, which can give us an edge over those using more generalist managers
Another key element of QuadReal’s investment activity in Europe is membership of INREV. ‘When Dennis Lopez and I joined the company in 2017, one of the first things we did was to become a member. I’ve always considered INREV to be an industry thought leader, and for us its most important contributions are to professional standards, governance and transparency. This doesn’t just apply to our European activities but also globally, where we see INREV’s work aligning terminologies and methodologies as crucial, particularly in the area of performance measurement and reporting. Ideally there should only be one agreed version of “the truth” when calculating investment returns, anywhere in the world, but that depends on common definitions of terms like NAV, for example, or Assets under Management (AUM) for which INREV has just published an assessment of the current definition and use.’
Although she is now playing a role at INREV herself, Lucy admits that she can continue to learn about the ways it can help investors from other regions as well as in her own region. ‘Speaking with peers who also invest from North America in Europe encourages us to learn from each other’s experiences on the basis that the power of many is greater than the power of one. In the past months, INREV has organised informal briefings giving the space for North American members to listen and discuss key topics on the European market . I think some of those participating in the programme may well go on to invest together.’ Despite the difficult challenges faced over the last year, the North American Seminar will return this year ready to welcome North American members in New York on 30 September and will be for the first time organised in a hybrid model to enable those who are not able to travel to New York to enjoy the insights as they are presented.
In the meantime, the most important thing is for organisations like ourselves to share best practices with our peers and ensure that our partners also continue to meet high ESG standards
‘I also believe that INREV is playing an important role in advancing the awareness of ESG issues affecting European real estate. This is a major consideration for QuadReal as our primary goal is to provide sustainable long-term returns to our stakeholders.
The scope of ESG is widening all the time, particularly in the social aspects and INREV has highlighted the way buildings can influence health and well-being as part of this.
Europe and Australia have led the way globally in recognising the contribution of real estate to carbon emissions, and we expect that low carbon buildings will ultimately provide stronger financial returns as well. I know that measuring this effect is something that INREV is exploring, although it will probably take some time to get off the ground. In the meantime, the most important thing is for organisations like ourselves to share best practices with our peers and ensure that our partners also continue to meet high ESG standards.
Join us in New York or Online
The North American Seminar will be held on 30 September at the New York Athletic Club and will be live streamed to those who cannot make it in person but would still like to participate in a ‘hybrid’ format.