Senior Heimstaden executives participated as panellists at the PERE Summit in London on June 14-16, one of the key events in the European real estate calendar for institutional investors and asset managers. Chief Investment Officer Christian Fladeland spoke on the Building Operating Platforms panel and Tami Chuang, Managing Director for Client Relations & Capital Raising spoke on the Leading Fund Manager strategies panel.
More than 400 delegates attended the panels and presentations and about a fifth of attendees were institutional investors, mostly coming from the UK and continental Europe.
Heimstaden attendees found that while investors reflect on the implications of inflation and interest rates, most remain steadfastly focused on long-term drivers to guide their short and medium term investment decisions.
"A key takeaway was that strategies built around demographic changes continue to resonate strongly,"Tami said afterwards. "Heimstaden has a resilient position in this space given our focus on affordably priced homes and we value the opportunity to share our views on how our scaled and vertically-integrated platform enables us to better navigate the residential environment in Europe than many of our competitors."
Tami outlined Heimstaden's evergreen investment strategy and its expansion outside Scandinavia since 2018 in a panel focused on fund strategies.
She explained how the company identifies growth markets by "being very entrepreneurial and data driven in our decision making."Heimstaden's Friendly Homes ethos to managing its 150,000 units in nine countries ensures "we really embrace a long term, socially acceptable business model around our housing investment strategy,"she added.
Since real estate is an asset class that typically offers investors some insulation from inflation through rents, the panel devoted quite a lot of the session discussing which sectors would be most impacted, the consequences for borrowing costs and the broader macroeconomic considerations.
Heimstaden sees inflation lifting rents across its regulated and non-regulated units, with the utility costs borne directly by the tenants in many markets. Currently where it affects the operator is through labour costs and building materials. This can be offset by adjusting the timing of certain refurbishment programmes as well as through scaled procurement, often with inventory in stock due to Heimstaden's practice of using standardised fixtures, appliances, and the like, she said.
The strategy behind operating residential properties as a service was outlined in more details in the afternoon session by Christian Fladeland in a panel focused on how managers create value for their assets. Panellists were quizzed on their appetite for operational risk, when to outsource, managing costs and how to manage operating partners.
Christian commented on how Heimstaden "has the ambition to be fully vertically integrated - but of course, it requires critical scale to actually make it viable." This philosophy underlies Heimstaden's approach to market entry, where strong conviction on the long term attractiveness of the market outweighs any market where the angle may be more opportunistic.
Asked how Heimstaden drives value, he explained that scale is important in finding efficiencies in the low margin business of property and project management - dealing with the complexity of multiple small leases and amounts of capital expenditure can easily lead to material performance drag. Heimstaden's operational and asset management teams are very much involved in underwriting the business plan for the investments in order to anchor ownership of execution, he said.
Challenged on how Heimstaden approaches scaling up its operational platform, Christian said starting from scratch in a new country comes at the expense of reduced momentum, even if Heimstaden has a playbook for how to establish organisations and adapt to local market conditions. "We prefer to do something that is a hybrid between starting from scratch and acquiring a large existing platform by buying a small existing manager and making them Heimstaden".
"Owning the full value chain in-house improves the quality of the offering but just as important we can create a ownership mindset around business plan execution - something that we have had a very hard time driving to its full potential when we have had outsourced services,"he observed. "You need to establish a culture around it."