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The pension fund for employees of the Royal Borough of Kensington & Chelsea will decide on an investment manager to help it allocate over £160m in UK property by the end of March, according a spokesman. The fund has already reduced its exposure to equities and will use the cash to finance its real estate investments.
The submission deadline for interested firms was 25 February and RBKC is currently reviewing the applications, the spokesman said. REFI Europe reported in January that the pension fund was seeking to lift its allocation to real estate to 20% (£216.4m) from 5% (£54m) and was looking for a partner to maintain a direct property portfolio and provide ongoing management services for the assets.
The RBKC fund is part of the UK’s national Local Government Pension Scheme. It has more than 10,400 members and over £800m of assets under management.
Real I.S., the real estate investment manager of German Landesbank BayernLB, has bought an office property in Paris for €46m on behalf of its BGV VII Europa fund as France remains a top investment target for international real estate investors despite recent political turmoil in the country.
BGV II held its final close in April last year after raising €600m to acquire core and core-plus assets within the logistics, hotel, office and retail sectors on behalf of institutional investors. The vehicle focuses on Germany and France but also invests in the Benelux countries, Spain and Ireland. Real I.S. said that France was “one of the most interesting and attractive markets” in Europe, when it acquired a retail park near Paris on behalf of predecessor fund BGV VI last November. Foreign investors were behind 37% of French deals last year, up from 26% in 2017, according to BNPPRE.
The 4,650 sq.m. office property that has just been acquired by Real I.S. is located in the 15th arrondissement. Built in the 1960s, it comprises five floors and was sold by French political party Les Républicains in a sale-and-lease-back transaction, according to a company statement.
“This acquisition has enabled us to further expand our French portfolio,” said Catherine Luithlen, president of Real I.S. France. “The office property in the Rue de Vaugirard is located in one of the most desirable districts of Paris and blends in well with the urban environment. It fulfils all the requirements placed on a contemporary and attractive office property. Based on its extensive repositioning in 2012, we believe this long-term investment has further upside potential.”
Despite high prices and a lack of supply, many institutional investors have been on the lookout for real estate opportunities in Paris. Last month, Swiss Life Asset Managers purchased a €1.7bn portfolio of 28 prime office buildings in the city’s CBD for €1.7bn, while in January French insurance group CNP got hold of an office asset on Rue Lauriston in the 16th arrondissement for more than €100m. Last year, US-based investment manager Invesco Real Estate acquired the 45,000 sq.m. Capital 8 office complex for €789m, its largest single-asset investment in Europe, while Canada’s Oxford Properties completed the €477m acquisition of the restructured Window building in La Défense.
BGV VII’s successor fund BGV VIII Europa was launched in June 2018 and focuses on similar investments across the same geographies. It plans to invest as much as €1bn.
Urban Exposure has committed a total of £110m of financing to residential developments in Birmingham after most recently providing a £66.9m loan for a mixed-use residential and commercial development in the city.
The latest loan was granted to UK housebuilder Galliard Group for the Timber Yard mixed-use scheme in the city centre’s southside district, according to a company statement. The project will comprise 379 one-, two- and three-bedroom apartments as well as 6,257 sq.ft. of commercial space. The financier already invested in the West Midlands city last year, providing a £40.2m senior development finance facility to residential developer SevenCapital for a 228-unit residential scheme with ground-floor retail at St Martin’s Place.
“At a time when Birmingham is expanding rapidly, the need for funding has thus far failed to meet its needs, and so we are proud to have provided £110m of funding for ambitious projects in the region so far,” said Urban Exposure CEO Randeesh Sandu. “We have a strong pipeline of projects and look forward to announcing further developments in the region in the coming months.”
Last December, Urban Exposure conducted a study showing that residential developers in the West Midlands will need a further £15bn to meet the UK government’s house-building targets. Chancellor Phillip Hammond announced a new target of 215,000 homes in the region by 2030-2031, meaning that 9,827 new homes will need to be built every year, in addition to the current average of 6,711 new units a year.
Urban Exposure has also financed other residential projects in the UK, providing a £83.3m loan to London-based Strawberry Star Group for a 6.8-acre development in Luton in January. The firm provided £522m worth of new loans between its initial public offering in May 2018 and the end of 2018.
Baytree, AXA IM – Real Assets’ European logistics platform, has named Dominik Weis as senior development manager in Germany to support the expansion of its existing pan-European portfolio, which aims to deliver more than 600,000 sq.m. of institutional-quality leasable space.
Effective immediately, Weis will be based in Frankfurt and report to Sascha Petersmann, head of Germany at Baytree Logistics Properties, according to a company statement. AXA IM – Real Assets established Baytree in 2015 to focus on new developments in the European logistics sector. The platform entered Germany in July 2017, with a 30,000 sq.m. development project in Hannover, and Petersmann was hired two months later.
Dominik Weis, senior development manager in Germany (image: Baytree Logistics Properties)
“Dominik’s appointment will increase our market visibility whilst enabling us to accelerate our interactions with customers and land owners across Germany,” said Petersmann. “I am excited by the opportunity to work with Dominik to grow the German business by delivering innovative warehouse solutions to our diverse customer base in locations that support their supply chains.”
Before joining Baytree, Weis held several senior development and investment roles at various logistics firms, including Harder & Partner, Segro and Garbe. To date, Baytree has delivered more than 5m sq.m. of logistics space for its clients across Europe, China and the Middle East.
Tristan Capital Partners’ EPISO 3 value-add/opportunistic fund has sold a mixed-use retail and office building in central Oslo to a syndicate of investors structured by Oslo firm Clarksons Platou Real Estate. Tristan recently announced that the latest fund in its value-add/opportunistic series (EPISO 5) had raised a record €1.7bn.
London-based Tristan has completed more than €1.4bn of deals in the Nordics in the last 10 years and the sale announced today is the firm’s second office deal in Oslo in the last six months, after it acquired Helsfyr Atrium in October. Located at Grensen 5-7, close to the capital city’s main shopping street Karl Johans gate, the asset has a gross lettable area of 14,000 sq.m. The sale was brokered by Pangea Property Advisors and Thommessen.
The asset in Oslo (photo: Tristan Capital Partners)
“The Norwegian market has performed well in the past few years, with the office sector in particular being driven by robust demand and constrained supply,” Anne-Jan Jager, director at Tristan said. “From an investment perspective, we still see value in Oslo and continue to proactively seek opportunities in strong locations.”
Tristan’s pan-European real estate funds include core-plus and value-added/opportunistic strategies with total AuM of more than €10bn. The firm currently has seven active funds and its recent EPISO 5 fund has attracted 39 institutional investors, including 60% having previously invested with Tristan. The company said this month that the vehicle could not fulfil as much as €1.5bn of investor demand.
Property investors are looking through European political uncertainty to focus on property fundamentals, helping drive demand for assets in the UK and Italy, two of the continent’s most tumultuous markets, according to UBS Asset Management Real Assets & Private Markets.
“For long-term real estate investors the political noise surrounding the uncertainty doesn’t really have an impact on appetite for the sector, as long as the underlying fundamentals remain strong – particularly with regards to the outlook for interest rates, the wall of money and occupier fundamentals,” European research analyst Zachary Gauge said in a presentation to accompany the release of the investment manager’s first global 2019 Real Estate Summary.
“Investors continue to increase their allocations to the sector despite these apparent uncertainties,” he added.
Investment volumes in Europe declined by 14% in 2018 to €273bn, although remained above the long-term average. Investment slowed in the fourth quarter of the year to €90bn, weaker than the €115bn recorded at the end of 2017, UBS AM’s research found. Office take-up by tenants also slowed in the final quarter of 2018, reflecting slowing economic growth around the world. However, for the year, letting volumes were down only 0.9% on 2017 levels after a period of prolonged growth.
While global GDP growth is slowing on the one hand, it is being offset on the other by factors like low unemployment, which is helping underpin rental growth, and by extension real estate pricing, UBS AM’s lead real estate strategist Paul Guest explained. “We have seen a slowdown in pricing growth – it’s really linked to rental growth or sectors that are in high appeal like logistics,” he added. With pricing at record highs in many markets and interest rates expected to rise, UBS AM believes that real estate investment could be starting to moderate from what have been historically high levels.
Nevertheless, the investment manager continues to actively seek opportunities in countries including the UK and Italy, Gauge said. The decline in sterling has been one positive for British property investment, while low yields for prime Milan offices – at one point last year lower than the yield on 10-year Italian bonds – indicated that investors were actually more bullish about the outlook for the financial hub’s offices than the outlook for the country’s government.
One area of real estate which has suffered as a result of weakening fundamentals is retail, particularly in the UK. Vacancy rates in park vacancy rates increased from 8.2% at the end of 2017 to 11.2% end of 2018, while high street vacancies are above the European average at 13%, UBS AM found.
“Uncertainty on its own is not enough to affect investors’ desire for real estate – it’s part of a much bigger picture,” Gauge said.
Invesco Real Estate has acquired an office building in Stockholm for its manage-to-core strategy as the US firm continues to position itself as a leading foreign player in the Nordic commercial real estate market, which is attracting growing institutional investor interest, especially from the US.
“We have been invested in Swedish real estate on behalf of our global institutional clients since 2006 and continue to be positive to the outlook for the office market in Stockholm,” said Rob Johnston, senior director of UK/Nordics transactions at Invesco RE. “This opportunity is well located in one of Stockholm’s major development areas, which is experiencing significant infrastructure investment.”
Located in Stockholm’s Hagastaden urban development project, the 18,000 sq.m. Skalen 24 property was acquired from Swedish insurer SEB Trygg Liv through Invesco’s Nordic local operating partner Scius Partners. The asset has the flexibility to add three additional floors with about 6,000 sq.m. of new offices, as well as an adjoining residential block of around 60 units, according to a company statement.
Invesco is one of many investment managers that have been mandated to seek the best commercial real estate opportunities across Nordic markets but also one of the many international ones trying to compete with well-established local experts and position themselves as leading players in the region.
In January, Swedish private equity real estate firm Niam was awarded a €150m mandate by the New York State Common Retirement Fund to acquire commercial real estate in Sweden, Norway, Denmark and Finland and last November it received €50m from the San Francisco City & County Employees’ Retirement System for the same purpose. And other recent mandates show the same trend. In June last year, Swedish Brunswick Real Estate Capital received mandates from various Nordic insurers and pension schemes to invest in real estate debt, while in March Stockholm-based investment manager NREP was awarded $40m by the Sacramento County Employees Retirement System, a $9.2bn pension scheme, to invest in Nordic property.
But international players have also been active in Sweden, competing to grab the best opportunities offered by a politically and economically stable market. They include Germany property fund manager Deka Immobilien, which bought the Länna Market retail park in greater Stockholm for €81m last September, Aberdeen Standard Investments, which sold an office and retail building in Linkӧping that same month, and Allianz Real Estate, which bagged a Stockholm office scheme for €175m last July.
Invesco RE invests in real estate on behalf of institutional investors through separate accounts, pooled funds, club deals and UCITS offshore funds. In December, the US investment manager and Scius sold Skanska’s HQ (20,500 sq.m.) to a real estate fund managed by Deutsche Bank’s asset management arm DWS. The two firms had originally purchased the asset from Skanska for SEK1bn (then equivalent to €110m) in 2014. Last February, UK-based Grosvenor Group sold a 10,000 sq.m. shopping centre in Helsingborg, in western Sweden, to Invesco RE and Scius.
Established in 1983, Invesco RE manages €55.2bn of real estate assets globally. The firm has been investing in core, value-add and opportunistic strategies since 1992. In Europe, Invesco RE has €9.9bn of AuM across 12 countries. The firm’s real estate vehicles include Invesco Global Direct Real Estate Fund, Invesco Real Estate – Asia Fund and Invesco Real Estate – European Fund.
Founded in 2007, Scius acts as a local operating partner to international and domestic capital investing in the Nordic real estate markets. The firm currently manages more than 800,000 sq.m. of commercial real estate in Sweden, which is valued at around €1.1bn.
AXA IM – Real Assets and Sirius Real Estate have formed a business parks joint venture, with ambitious plans to invest more than €500m, as institutional investors, especially from the US, show growing interest for the German light industrial sector, Sirius CEO exclusively told REFI Europe.
“We currently have a portfolio value on our own balance sheet of just over €1bn and we would like to see this JV grow quite quickly to at least 50% of our balance sheet portfolio so €500m+,” Andrew Coombs, CEO of the German specialist firm, said in a phone interview with REFI Europe. “If we were to put another €100m into this before the end of the calendar year, I would see it get to north of €400m by the middle of next year.”
Expansion in the sector will be supported by growing institutional investor interest in business parks, especially from the US. “German light industrial is being more widely recognised and we are seeing international money coming in from outside Germany,” Coombs said. “I have just come back from a roadshow in New York and Boston and we’ve been talking to prospective investors and investors that have registered in the last 12 months. Particularly in the last 12 months, what Sirius has started to see, not in terms of direct ownership of property but in terms of purchase of the Sirius shares, is a lot more interest from the US.”
Coombs also noted interested from institutional South African investors and said that while Asian money has not come in yet, Sirius is sensing enquiries and inquisitiveness from those sources. Enquiries from China are more to do with supplying lending into the asset class than looking for direct ownership, the CEO added.
The JV between Sirius and AXA IM – Real Assets is not the first success story in the sector. Last summer, insurer Swiss Life completed the acquisition of Berlin-based corporate real estate specialist Beos. “Since Swiss Life bought Beos, they have invested €500m euros in a portfolio at the end of last year. This is the continuation of a trend,” Coombs said. Prior to the acquisition, the platform was supported by US money for several years, he added.
If the asset class has been so popular with institutional investors it is for two main reasons: an attractive yield spread and stable cashflows. “If you look at the assets that we’ve just sold, they are valued at a gross yield of 7.6%. We sold them at 6.2%. Typically, they are financed at less than 2% so you’ve got between 4 and 5% yield spread. The cashflows are also a lot more stable because the assets are multi-let by multiple industries, so you don’t have exposure to a specific industry sector,” Coombs said.
AXA IM – Real Assets and Sirius joint venture, which has been named Titanium, is starting with AXA IM – Real Assets buying a 65% stake in a €168m portfolio from Sirius on behalf of its clients. The business parks are located in Berlin, Mainz, Nurnberg and Bayreuth and provide a combination of office, warehouse, industrial and storage space. Total cash commitment from AXA IM – Real Assets amounts to €43.9m and the deal is expected to generate total cash proceeds of more than €70m for Sirius after refinancing and expected related costs.
“This JV opportunity is going to enable Sirius to do more than it has done in the past. We can focus on assets that are much more stable or ready,” Coombs told REFI Europe. “We will be able to buy much bigger lot sizes and portfolios. Typically, up until now we have been buying asset values of up to €30m and what this JV will enables us to do is buy portfolios as well as larger assets that are €70m or more.”
BNP Paribas REIM has acquired its first Berlin asset for the NEIF III fund, which exclusively invests on behalf of institutions and targets a 4% annual payout. The vehicle has already secured more than €400m of equity commitments, predominantly from insurance firms and pension funds in the EU.
This is not the first time BNP Paribas REIM tries to buy a property in Berlin, where local and international investors are competing to grab the best assets. “The market in Berlin is extremely competitive, with a lot of investors looking for an office allocation in Berlin,” Laurent Boissin, fund advisor for NEIF III, told REFI Europe. “We have been working on many deals in Berlin in past … without success.”
Large office space certainly is a rare commodity in Berlin, particularly in central locations. In January, an unnamed foundation bought the 6,600 sq.m. Charlotte property on Gendarmenmarkt, while AXA IM – Real Assets announced it had purchased the 48,000 sq.m. m. TechnoCampus office complex on the fringe of the city’s CBD. Last year, French alternative investment firm Ardian snapped up a 30,000 sq.m. office property near Potsdamer Platz.
Franklin Haus office building in Berlin (image: BNP Paribas REIM)
The 11,000 sq.m. Franklin Haus office building, which has just been acquired by BNP Paribas REIM, is located in the district of Charlottenburg, close to the city centre. It is expected to be delivered at the end of 2020 and targets a LEED Gold green certification. “Vacancy in Berlin remains at a very low level, with strong demand from tenants despite a limited pipeline of news projects for offices. This situation should support further rental value increase in the future,” Boissin said.
Managed by BNP Paribas REIM, NEIF III has a target size of €1.8bn. The vehicle recently acquired the Kallmorgen office tower in Hamburg and a 20,000 sq.m. property in Barcelona. It also has assets in Paris, Munich and Düsseldorf and plans to diversify to other eurozone countries, Boissin said.
Genesta is planning to launch a third Nordic value-add real estate fund this spring, CEO David Neil exclusively told REFI Europe. The firm’s second value-add vehicle, which raised €372m in equity commitments, has just sold an office property in Oslo.
Fully invested fund GNRE Fund II has divested two of the 12 properties it owns, after also selling an asset in Finland, and has repaid about 25% of committed capital, Neil told REFI Europe. The firm is now already planning the next step. “The occupational markets are very strong in the Nordic capitals, where we focus our investments,” said Neil. “Liquidity is good and we see interesting investment opportunities and we want to capitalise on that by raising our third value-added vehicle. We should be able to announce something on this topic during the spring.”
The Dronning Mauds gate 15 office asset in Oslo (image: Genesta)
Genesta announced today that it had sold a property in Oslo on behalf of GNRE Fund II. The asset was bought by Nordic investment bank Carnegie Norway for Nordea Liv, Norway’s third-largest private life insurance company. Located in central Oslo, the Dronning Mauds gate 15 property was acquired by GNRE Fund II when it was 50% vacant. The building has been environmentally certified according to BREEAM and is now fully let to commercial property advisor Malling & Co and law firm Glittertind, among other tenants. Pangea Property Partners advised Genesta on the deal.
“The disposal showcases the success of our strategy – in 2016 we set out to create an income-producing product for institutional investors and I am happy to see it succeed,” Neil said. “During our ownership about 95% of the leaseable area was let or renegotiated in about half of the time we estimated it would take.”
GNRE Fund II is a closed-end fund that was launched in 2015 with €373m in equity from 12 institutional investors. The vehicle invests in value-add office properties in Stockholm, Copenhagen, Helsinki and Oslo. It also invests in the retail and logistics sectors in large metropolitan areas in the Nordic region. The Nordic investment manager launched its first closed- end, value-add vehicle, Genesta Nordic Baltic Real Estate Fund I (GNBRE Fund I) in 2007 with €176m in equity from 12 European institutional investors. The fund invested in office, retail and logistics real estate assets in the Nordic and Baltic region.