2023 Investment Outlook: Strategies for an uncertain time

As the world continues to face unprecedented challenges, both on the ground level and in the capital markets, we reflect on how we’ve navigated choppy waters in 2022 and look ahead to opportunities in our 2023 investment outlook.

Global partnerships will open new markets

In 2023, maintaining a broad global footprint and diverse portfolio will provide a distinct advantage.

From a regulatory perspective, geopolitical tension, inflation, and recession are likely to press central banks into tightening regulations and demanding greater transparency from institutions.

Having recently become the first company to be listed across four GCC exchanges when we were listed on the Abu Dhabi Securities Exchange (ADX) earlier this year – and thus governed by four regulatory bodies – we are ahead of the curve on that front and are in a strong position to leverage the need for greater transparency in 2023. Towards the beginning of 2023, we were also upgraded from the Main Market to the Premier Market of Boursa Kuwait, which is the flagship of the Boursa Kuwait markets, targeting companies with high liquidity and a medium to big market capitalization. We remain equally as bullish about the GCC as the US, as the region is experiencing increases in FDI and a massive influx of capital amid high oil prices, national economic diversification strategies, and comprehensive legislative reform. Saudi Arabia and the UAE, where we have offices, are presenting themselves as prime areas of opportunity for investment.

We are also creating value through inorganic growth via international partnerships. By acquiring asset managers and partnering with market leaders and experts in their respective fields, investment firms not only capitalise on the opportunity to create rapid equity value, but it also gives us the capability to adapt at greater speeds even as markets become more volatile, as we gain access to a fresh talent pool of experts that have their finger on the pulse of their respective markets.

Our reputed partners, including Big Sky, Roebuck, and Student Quarters will help us penetrate promising markets and we are committed, as a strategic goal for 2023, to doubling their AUM by giving them greater access to comprehensive support, capital, and access to our region as a whole.

The importance of these relationships was put into action at our inaugural real estate conference held in London in November. This was an amazing opportunity to gather our global network of investors and partners to get together and discuss market conditions, compare strategies, explore opportunities, and brainstorm solutions. The event concluded with the launch of our UK office, which further strengthens our international presence and capabilities, enabling investors to tap into the rich opportunities in European real estate.

Real estate continues to deliver

Despite looming recessions in the US, UK, and Europe, certain real estate segments retain robust fundamentals. Over the last 24 months, we deployed nearly *$2 billion* into European and US real estate with a focus on medical clinics and the Living sector, primarily in the areas of multifamily and student housing.

These deployments included the acquisition of a portfolio of over 30 medical clinics in the US, with our subsidiary Big Sky, capitalising on demographic trends in the US and a continuing increase on healthcare expenditure. The portfolio included tenants such as Cleveland Clinic, Memorial Herman and others. We also acquired two US student housing portfolios, with our subsidiary Student Quarters, in a sector positioned to benefit from double digit rent growth in 2023. With university enrolment rates increasing during times of economic hardship, and as universities continue to outsource additional housing requirements to the private markets, student housing will be a resilient sector moving forward.

We also made some strategic exits in 2022 that demonstrate the value that logistics real estate can generate over a relatively short holding period. Our subsidiary Roebuck sold its Tesco Distribution Centre for $135 million, reflecting a 16% annual return following a four and-half-year hold. The asset manager also exited its Amazon Last Mile Logistics Warehouses Portfolio in Spain, generating a near 17% annualised return in less than a year. Europe continues to offer excellent opportunities in real estate, and we are seeking further acquisitions through Roebuck in 2023.

Beyond that, the current environment of tightening financial conditions also means that we have to be nimbler and more creative in our deployment mechanisms. For instance, we are increasingly exploring debt as a tool to deploy capital, due to its current attractiveness in terms of return and risk.

Throughout 2023 and beyond, we will proactively hunt recession-resilient sectors, building on our strong pipeline in the GCC, Europe and the US in addition to looking to acquire specialist asset managers that can help accelerate our growth.

Any investment model worth its weight draws on data, digital insights, the expertise of its team, and a vital sense of opportunism.  We are fully confident in the ability of our agile yet resilient model to navigate even the most challenging investment landscapes and deliver innovative products that provide a USP and create added value.

Above all, we will remain nimble in 2023. Within every challenge lies an opportunity, and within every downturn is the promise of brighter days ahead.