Networking Lunch

Welcome & Introduction

PART I :
GLOBAL VISION - OUR (BUSINESS) WORLD HAS CHANGED. CHALLENGES AND OPPORTUNITIES FOR THE INVESTMENT MARKET IN 2023

What does the end of ‘money for free’, the unexpected return of high inflation, exploding energy prices and increasing tensions in the world mean for the investment market tomorrow and the day after tomorrow? Experts explore and discuss the prospects and trends for real estate market.

LIVING WITH NEW MACROECONOMICS IN A NEW GEOPOLITICAL CONTEXT

Facts & Figures: how to read them, according to Innes McFee, Oxford Economics?

The macroeconomic and geopolitical environment has seldom changed so much within one year as it did in 2022. What are the most recent figures? How should we interpret them in the real estate business?

Innes McFee, Chief Global Economist at Oxford Economics, will summarize it in a nutshell.
- Will inflation continue in 2023? What will be the impact on real estate?
- How likely is a recession? Will it be a short but severe or a long but light recession?
- Should we fear massive job destructions and a drop in private consumption?
- Do we expect interest rates to continue to rise?
- How should the ECB tackle surging inflation without further deterioration of government budgets and debt?

"Contrarian approach"

Brookfield had been monitoring the Belgian real estate market and in 2022 completed a strategic transaction in our office market.
On 22 February 2022, a fund managed by one of Brookfield’s real estate private funds announced a takeover offer of 47,50 euro for Befimmo, listed on Euronext Brussels, valuing the company at around 1,34 billion euros. This Belgian Real Estate Investment Trust (SIR-GVV) is focused on offices, mixed-use buildings and coworking spaces in BeLux. It is one of the Belgian office market leaders, with a portfolio worth circa 2,8 billion euros and comprises 60 offices, mixed-use buildings and eight coworking spaces.
The bid price represented a 52 percent premium over the share at a time when Befimmo was close to the record low of 31.25 euros a share. However, the bid price was more than one-fifth below Befimmo's net asset value at that time, the sum of all properties in the portfolio minus debts. It made it interesting for a long-term investor such as Brookfield.
In October, Brookfield published that it had obtained 96,9 percent of all shares, resulting in a squeeze out public offer and a delisting of Befimmo on 3 January 2023 after 27 years on the stock exchange.
Brookfield has the ambition to build out Befimmo as a Benelux platform for offices. The takeover took place in a year of fast-changing market conditions. However, Brookfield sees continued strong demand for high-quality, well-located office real estate assets with strong sustainability credentials and wellness amenities.

Vincent Kerboull will share with you the view of Brookfield on the market. These topics, and much more, will be discussed:
- What is Brookfield houseview on Real Estate in Europe? What are the challenges and opportunities ‘in the new times’?
- Why did Brookfield invest in Belgium?
- What are the key drivers of Belgian office real estate market? What are the one which should support Brookfield portfolio to generate value in the future?
- What is the sentiment about alternative investments. What about portfolio diversification in challenging times for traditional assets as offices, retail and logistics?

HOW TO NAVIGATE THROUGH A DISLOCATED CAPITAL MARKET ENVIRONMENT WITH A CHALLENGING FINANCING BACKDROP?

The cost of capital is no longer close to zero. Debt capital markets across Europe, as well as equity markets, have been severely impacted by market turbulences. This places significant pressure on estate corporates that rely heavily on bond financing.
Interest rates have increased by 200-400 bps over the past 12 months. Will they stabilize? What will be the effect on the investment market? What will be the impact of the refinancing market?
Is it better to wait in those uncertain times to invest more into ‘risky’ assets as real estate? From the buyer’s side? From the seller’s side? Or is it just the right moment to go for an investment?
The valuation levels for equities as well as bonds had a hard time in 2022. But crisis is opportunity. They are offering nowadays returns not seen since the financial crisis of 2009.
Rising spreads and interest rates seem to make bond investing more attractive. And we all know there is money waiting for the right investment opportunity…at the right moment. There are indications that the recession, if occurring, will be soft.
But how do you do that financing in the present market conditions? What can today still be financed, what not? Is hedging more than ever a life insurance or is it nowadays too expensive? How far can you live with covenants? Are you going for fixed or floating rates?
Real estate companies may have to consider alternative sources of funding. Who is at the buyer’s side? Who has money and could be interested in investing?
Major topics raised:
- What about the rise of equity financing? Will it soon become more attractive to go public for equity?
- What are the alternatives if you cannot find ‘classic’ equity or debt financing?

PANEL DEBATE: BELGIAN LISTED OR NON-LISTED REITS IN 2023
Who will be King in 2023: listed or none-listed real estate?

The new world for listed & non-listed real estate.

Thanks to cheap money worldwide, the real estate sector, especially listed real estate, performed extremely well until 2021. Research by Professor Nico Dewaelheyns (KU Leuven) has shown that Belgian listed real estate in the period 2012-2021 provided an annual return (including dividend) of +14,24 percent, performing much better than shares in general (+8,85%), an apartment for renting (+4,37%), a house for renting (+4,31%) or state bonds (+1,42%). The belief in listed real estate therefore was extremely high. On the stock exchange, premiums were paid of up to 50 percent and more on the intrinsic value (the true value of an asset of a company), especially in markets like logistics (WDP, Montea, VDP), student housing (Xior) or health care (Aedifica, Cofinimmo).
Non listed real estate performed also outstandingly. The yields for offices compressed to 3,3 percent at the end of 2021, also thanks to the availability of cheap money and the ongoing yield compressions to extreme low levels.
In 2022 the era of cheap money finished due to the increase of interest rates by the central banks to fight inflation. Soaring energy prices, war and geopolitical tensions, plus lots of problems in China brought slower economic growth and more uncertainty as well. Both the market of the listed estate (with a negative return of around 30 percent in 2020) as well as the bond market had one of their worst years in decades.
Yields are reset upwards for the first time in years. Borrowing costs in Europe and Belgium increased last year by between 200 – 350 bps. Bond rents went up from around 0,5 € percent to more than 3,6 percent.
The yield gap between bonds and offices went down from 284 bps end 2021 to 68 bps end 2022.
Bonds are back as a competitor for real estate, listed and non-listed.
The spread between the lowering bruto return (from 6,4 percent to 5,5 percent) and the higher cost for new loans (from 1,4 percent to 3,3 percent) went down from around 4 percent to around 1,3 percent.
Is listed real estate better off in such a market than non-listed real estate?
Our panel of experts on both our local and international markets will debate the following topics:
- Investors are looking for higher rental returns. Does it mean the real estate prices should go down and lead to depreciation of real estate values? Will the situation in Belgium be different than elsewhere?
- What will be the effect on the valuation of a higher rental return with 0,5 percent? Will the depreciation go slower down into the validation than for listed real estate?
- Depreciation of the value of a portfolio will increase the debt ratio by 4 to 5 percent. What to do as an investor? Delay investments or disinvest? Increase capital? What are the opportunities for listed and not listed?
- Was the decrease in the market of listed real estate exaggerated or does the rent increase have more consequences than we think?
- Will listed and non-listed vehicles continue to invest in 2023? How would they finance their expansion and the necessary capital expenditures to make their portfolio’s future proof’?
- What are the advantages of remaining listed on the stock exchange? Is it easier to finance transactions in a ‘normal context’?
- What are the risks to get out of funds that bought real estate? Opportunities?
- What is the future for listed REITs? Will there be other delistings or changes of status?

Coffee break

PART II:
Market intelligence & asset allocation

OCCUPIERS & INVESTMENT MARKETS:
2023 PROPERTY PREDICTIONS

The current difficult market context implies value adjustments for all asset classes, but 2023 is not 2008: systemic risk is absent, so this will create investment opportunities. For example rising energy costs will hasten the move towards more efficient buildings and give a boost to the refurbishment of existing assets. This is valid for all asset classes, from offices to residential and logistics. Opportunities will also arise in retail as dwindling profit margins are pushing online retailers to adopt omni-channel approach.

Coliving opportunity

ULI and JLL’s new report offers recommendations for coliving to unlock the great potential provided by powerful economic and demographic drivers.

With a new coliving best practice guide, the Urban Land Institute (ULI) and JLL provide guidance for a rapidly evolving European coliving sector. ULI and JLL’s new report offers recommendations for coliving to unlock the great potential provided by powerful economic and demographic drivers, while overcoming some of the barriers that the sector has been struggling with so far.

In recent years, the sector has emerged as a powerful tool to promote sustainable living and benefit residents, communities, and cities alike. In Europe, while starting from a very low base, the sector has witnessed rapid growth, with investment of roughly €1.2 billion from 2020 to mid-2022 into coliving real estate, with further capital commitments backing the expansion of operational platforms.

The guide offers detailed insights and best practice examples to support the real estate industry and other stakeholders with specific recommendations regarding policy frameworks for coliving developers, design and development of coliving schemes, operations and technology, and financial metrics to improve transparency.

Panel Debate: Sectoral Opportunities
On which horse should you bet?
Where is the place to be in real estate in 2023?

Our panel of experts on both our local and international markets will debate the following topics:
- During crises in the past, investors tend to revert back to the largest, most liquid sectors such as
offices and retail. Will that happen again?
- Will ‘classic’ residential stay the most attractive and less risky business? Will the bright demand
forecasts for this sector not be undermined by higher interest rates and less fiscal support?
- Is it better to bet on its niches as healthcare and student housing?
- Will successful newcomers as life sciences, data centers and new energy infrastructure, coworking,
… will keep expending?
- Is the best time over for logistics as e-commerce seems to reach is limits?

PART III:
Captain of Industry

THE REAL (ESTATE) STORY OF JOHAN BEERLANDT

On this rare occasion Johan Beerlandt talks about the secrets of the success of Besix over the last decades and his vision for the future of the construction and real estate business in these challenging times.
Johan Beerlandt can look back on a life time career of 48 years -and still counting- with BESIX, one of the oldest and most successful Belgian companies in international business.

In 2004 he realized one of the most audacious Leveraged Management Buy Outs in the history of Belgium. He not only prevented BESIX (then named SBB for ‘Societé Belge de Béton') being sold off to a foreign company, but he has also, over the years, built out BESIX as a group that stands today for much more than a construction company, with in 2021 3 billion euros of revenue, 11.400 employees, being active in more than 25 countries and 5 continents. The group stands for much more than the construction of the Burj Khalifa, the highest tower in the world, and has large ambitions.

Closing remarks

Networking Cocktail