Timbercreek is a global alternative investment manager focused on real estate. We maximise returns for investors by employing a value-oriented investment philosophy combined with an active management style to identify assets that will generate predictable cash flow over the long term. We have earned a reputation for providing conservatively managed, risk-averse investment opportunities for institutions, trusts and endowment funds, discretionary investment advisors and qualified individuals. Our core competency is our ability to accurately value cash-flowing assets based on a comprehensive analysis of the quality and sustainability of their current and future revenue streams. This fundamental knowledge of bricks-and-mortar investing is critical to identifying high-quality real estate investment opportunities. Timbercreek’s global real estate investment platform currently manages over C$8bn* in both private and public real estate equity and debt in North America, Europe and Asia-Pacific. Investment structures include core, value-add and opportunistic strategies that are offered through separate accounts and commingled private and public funds. Timbercreek is headquartered in Toronto with offices in New York, Hamburg, Dublin and Hong Kong.

*As of October 2018. Includes syndicated debt.

Sector forecasts

Industrial: The demand for Continental European logistic assets has continued to rise and cap rates have seen further compressions. However with multiple local developers, the supply level has kept up with the increase in demand resulting in less rental growth when compared with the UK or US markets. The market on the continent is furthermore supported by good infrastructure networks and city urbanisation has so far been less of an issue. Existing centres can cater to clients on a 24-hour basis and are typically closer in proximity to consumers than what you would see in the US. Nevertheless, we have seen the growth from economic recovery in countries like Spain with attractive occupancy and rental increases. A structural shift in the importance of logistics continues to be a general theme, even in southern countries albeit to a lesser extent. In the UK we are seeing less potential for investment since the strong growth in the sector, in our view, has been priced in to markets. The search for alternative investment opportunities away from office or retail in the UK has also led to the strong outperformance of sectors such as logistics.

Office: The European office sector has seen strong fund flows especially in Germany and Sweden. The return in these markets has been more attractive than Paris or London and in Germany the yield gap over risk free remains one of the highest. Economic strength has led to decreasing vacancy levels with increasing but still moderate rental growth in most cities. London, on the other hand, has been a bit less in focus, influenced by the Brexit negotiations. The capital market is punishing REITs across the board in the UK with discounts to current transaction prices of up to 20% in the London office market. The increase in rent-free periods we have witnessed over the last two years has stabilised in the past six months. REITs have decreased their leverage and continue to act as net sellers of stabilised assets.

Residential: The residential sector in Continental Europe is seeing in most regions too little supply and therefore a build in rental growth pressure. This is especially true in Germany where the percentage of renters is rather high and also involves a lot of political discussions. In reality the rents in Germany are on average still relatively low compared with the rest of Europe and cap rates are also amongst the highest. So although the return expectations keep dropping, the risk-adjusted return that factors in the supply and demand outlook remains attractive.

Retail: Retail has started to experience a strong re-rating this year. The sector lags in timing behind their peers in the US, but at current valuations in the capital markets the REITs trade at similar discounts to the direct market. In the direct market the historically high demand for retail centres has shrunk. At one time the sector functioned as a safe haven in times of zero growth, and retail rents were able to provide an attractive stable cash flow with an indexation kicker. Today the health of retail is put into question with the increase in online shopping – a concern for landlords of departments stores, hypermarkets, luxury stores on high streets as well as secondary retail centrrs. In Italy, retail spending seems to be declining and Poland is also facing some headwinds. Markets have so far only reacted with negative adjustments in the UK. We are expecting increased cap-ex spending over the next few years in an effort to keep retail locations fresh, attractive and inviting for consumers versus the digital experience. The trends in this sector are likely also going to be influenced by local culture, climate or infrastructure. It will most likely take years to be able to differentiate the clear winners from the losers in this battle to influence consumer behaviour. We are confident that REITs as focused niche players will often be able to succeed over other market participants when it comes to taking an active management approach in this space.

Other: Special themes such as student housing or healthcare continue to grow as an investment target and has also increased its presence in the listed real estate universe.

Investment principles & strategy

Timbercreek focuses on identifying and valuing real estate investment opportunities on a risk-adjusted basis. We source investment opportunities across the capital stack and access stable, inflation-hedged cash flow by investing in real estate directly, investing in debt secured by real estate and by investing in companies (publicly and privately) that own investment-grade real estate. We maximise value by employing a value-oriented investment philosophy combined with an active, hands-on asset management platform to identify opportunities that will generate predictable and sustainable long-term cash flow. We have earned a reputation for providing conservatively managed, risk-averse investment opportunities for our investors. The following strategies are offered through focused mandates as well as through integrated and customised solutions to meet individual investment mandates:

Private Equity: These strategies are comprised primarily of direct real estate investments in a portfolio of multi-residential properties across Canada that we own and manage. We also invest in other commercial real estate sectors, primarily in North America, through our global investment platform as well as through partnerships with high- quality owners/operators.

Private Debt: Timbercreek targets inefficiencies in markets where economic and regulatory changes have caused constraints in capital to real estate investors. We have identified these conditions emerging in global real estate markets, spurred by ongoing debt crises. Timbercreek’s debt investment strategies are designed to meet the specific duration and risk/return requirements of our investors and are supported by a team of experienced originators/underwriters located in Canada, the US and Ireland.

Global Real Estate Securities: Timbercreek offers global real estate exposure through investments in public equity and debt securities. Our global securities platform allows us to create tailored solutions for investors seeking global real estate exposure and to provide investment strategies that can efficiently capitalise on mispricing in different global markets. We employ the same bottom-up approach we take to real estate investments when investing in public securities, which is to underwrite the assets directly, but primarily access the bricks-and-mortar through publicly listed real estate securities.

This information is provided for use by qualified accredited investors for informational purposes only. It is not intended for, and should not be distributed to, or relied upon by, the public. Information described herein reflects the views of Timbercreek Asset Management Inc. as of the date hereof. No representation or warranty is made concerning the accuracy of any information provided herein and there can be no guarantee that any forecast or opinion set out in these materials will be realized. This is not investment advice and may not be construed as investment, legal or tax advice, or as sales or marketing material for any financial product or service sponsored or provided by Timbercreek Asset Management Inc. or any of its affiliates or agents.