Seizing opportunities, credit and equity investing across the real estate landscape was the topic of Jersey Finance’s summer Funds Focus event, which took place in June.

The event kindly sponsored by Vistra, welcomed a panel of experts who discussed the trends within real estate funds and confirmed that now, more than ever, there are many investment opportunities within the sector.

Director of Funds and Corporate at Jersey Finance, Nicola Le Brocq opened the event, commenting that Jersey has established itself as a leading jurisdiction for structuring, managing, and administering funds and is seen as a domicile of choice for alternative assets and a destination for managers. Nicola went on to reference the most recent Monetary Report that confirms the net asset of funds in Jersey, as of mid-2023, stood at US$650 bn.

Nicola added: “Whilst Jersey’s fund industry is primarily driven by private equity and venture capital, real estate funds rank second and interestingly private debt funds have seen the highest growth in net asset value this year, with a 21% increase compared to 2022”.

Keynote Speaker Melinda Knatchbull, who is the Chief Financial Officer at Sellar, a family-owned real estate company (best known for having developed The Shard, Paddington Square and leading the proposed redevelopment of Liverpool Street Station), provided a bird’s eye view of the market and suggested that the real estate industry is at a crossroads. With the end of ‘free money’ and the higher level of interest rates, Melinda noted that this “new normal” has a significant impact on the real estate fund market.

However, Melinda commented that this does bring significant opportunities, with an optimistic rise in confidence, re-pricing in assets and the speed of price correction depending on sector and structure, all playing their part in both direct and indirect investing.

During the keynote we also heard of the rise of operational real estate and the structural megatrends such as demographic changes, digitalisation and decarbonisation.

Moving on to the panel discussion, Melinda was joined by Ben Eaton, Tax Partner at Mayer Brown in London focussing on real estate in UK and across Europe, Matt McManus, Partner in the investment funds team at Ogier in Jersey, Scott McClure, Group Commercial Director at Gen II in Jersey and Tom Lloyd-Jones, Chief Investment Officer at Zenzic Capital which is a real estate opportunistic credit fund based in London.

The discussion began with a summary of what our panel are seeing in the current market. From a structural perspective it was confirmed the interest in UK tax resident vehicles incorporated in Jersey remains strong, particularly in areas such as real estate credit where QAHCs are becoming popular and REITS. The flexibility of the corporate regime in Jersey was highlighted by Matt, as a key added draw to this type of structuring.

Concurring with Melinda’s point during the keynote the panellists also agreed that clients are currently more opportunistic and positive compared to this time last year, and they are seeing a notable increase in activity with capital flows from Asia, US and Europe.

From a credit perspective, Tom confirmed that 2024 was throwing a lot of diverse and interesting opportunities. In particular, the ability to earn double digit yield from quality senior credit. Part of that is being driven by the ability to earn double digit yield from quality senior grade notes. In addition, there is a good supply demand balance. That said, Tom raised the concern that there are pockets of distressed assets to watch out for, in particular the commercial property space. The panel then touched on the complexity of working through the tax issues of distressed assets.

The rise of alternative lenders was also touched on, and while it’s being observed across private credit markets, real estate credit is certainly looking at non-bank solutions where transaction speed and certainty is very attractive.

Reverting to the operational real estate theme, Melinda quizzed the panel on their thoughts on the opportunities and challenges. From a tax perspective, Ben voiced a challenge from experience, that is having to deal with two ‘tax buckets’ being the asset itself and the operational business, and how best to preserve the tax profile.

Scott followed on to say that clients are certainly getting more interested in the operational aspects rather than just the asset. The panel went on to discuss the importance of the management and quality of the operational side of the asset and how that can impact the real estate value.

You can view all of the images from the event on our Flickr account. To find out more on Jersey’s fund offering visit our dedicated funds pages.