May 16, 2024
In his latest interview, Charles Allen, Head of European Real Estate speaks to Guy Montague-Jones at REACT about Fiera’s fundraising focus, our European expansion and why now is a good time to buy despite market uncertainties.
Five years on from Fiera Capital’s purchase of Palmer Capital, Charles Allen, who heads the European real estate business, says the deal has opened doors.
Since selling to the Canada-based investment manager, which has around $162bn in assets under management, markets have been turbulent. A year after the deal completed, the Covid-19 pandemic hit – and then more recently valuations have come under pressure amid higher rates.
It has not been an easy market to raise money, but becoming part of Fiera has helped, providing access to a global sales team. Allen says the business now has a more global investor base than it did during the Palmer Capital days. It has also benefited from access to the know-how of the wider group, which was helpful when launching Fiera’s real estate debt business, as the company is already a major credit investor globally. But otherwise, in terms of the day-to- day, little has changed.
Allen says: “Fiera Capital has grown rapidly by bolting on best-in-class teams and giving them a huge amount of autonomy, but also high levels of accountability. That for me is really powerful. It feels like we’re still running a business but within a bigger business.”
The biggest strategic move from Fiera in recent years has been its move into the debt market, with the hiring of Richard Howe and David Renshaw in 2022. The new platform launched with £250m in seed commitments, and then launched a debut pan-European debt fund a year later.
Expansion plans
The new fund marked Fiera’s expansion into the Continental European market. A move into European equity investment is likely to follow, although there are no imminent plans.
“There’s definitely a medium-term plan to grow an equity business in Europe and we’re already seeing quite a lot of exciting opportunities,” says Allen.
The focus for now is on scaling the debt business, and further expanding across Fiera’s main markets of industrial and residential.
Fiera raised £225m for a new industrial development fund just as the market was turning, which Allen said was great timing.
“We didn’t really do a deal for the first probably eight or nine months until the market started to stabilise. Effectively we’re buying land at a 50% discount to where we were buying it previously – we think the returns from that vintage should be super attractive.”
The investment manager has also been busy in recent months in the residential sector with Packaged Living, which has been growing its build-to-rent and single-family home portfolios. More is set to follow, including expansion into other living sub-sectors – notably co-living.
When it comes to single-family housing, Allen says the business has benefited from having established relationships with housebuilders, thanks to being already active in the strategic land market.
Allen adds that Fiera’s property company model also makes a significant difference when sourcing deals. The investment manager is currently invested in nine property companies operating across different sectors and parts of the country.
“We have 80 people across these nine companies, of which half are deal finds and the other half are deal deliverers. It gives us a very granular sourcing opportunity and enables us to buy a lot of very good quality off market deals.”
He says the firm is open to adding one or two more property companies to its roster, but it will be discerning. It typically only brings on board a new company every couple of years, even though rarely a week goes by without someone pitching to partner with Fiera. Allen says the key attribute it is looking for is an entrepreneurial mindset.
Time to buy
As for Allen personally, he has not had the easiest of rides since taking over the head of real estate role from Alex Price in summer 2022. The market began to turn almost as soon as he took the job.
Fiera has not been immune to falling valuations, even if Allen says that by operating with low levels of leverage and focusing on industrial and residential, both sectors seeing continued strong rental growth, and it has avoided the worst of the market fallout from higher rates.
He says: “It’s been the most exciting two years of my career without doubt. I’ve absolutely loved it. It’s also been a great learning curve and I always think when your back is a bit more against the wall, that’s when you really learn the most.”
“There’s a great opportunity to be buying things in a very thin buyer’s market”
Charles Allen, Fiera Real Estate
As for what the market does next, Allen does not buy into the argument that values will necessarily rebound – arguing that if interest rate cuts only prove to be modest, there could be another outward shift in yields. However, he still believes that now is a good time to be investing.
“For those with dry powder right here, right now, there’s a great opportunity to be buying things in a very thin buyer’s market. There are some people out there that need to sell and that’s creating some really exciting opportunities.”
Expect to see Fiera and its property company partners competing for more deals in the coming weeks and months.
