INTERVIEW: M&G Real Estate, MN on the new European Living Property Fund with €578m of equity

This week, M&G’s Alex Greaves and MN’s Joep Barten explained to PropertyEU the context behind the major announcement of a pan European residential strategy, including an approach summed up by ‘Learn, Connect, Grow, Relax, and Re-connect’.

Greaves is M&G’s head of UK and European Living, while Barten is real estate portfolio manager at Dutch pension administrator and asset management group, MN.

MN has made a €400 mln equity commitment to the M&G European Living Property Fund.

Asked about the significance of the news, Barten said that for MN and its clients, PMT and PME, this was a ‘very much appreciated addition’ to the real estate residential portfolio.

Not only did it take the investors closer to finalisation of their European portfolio but gave additional exposure to certain segments of the residential sector.

The new fund targets student housing, single and multifamily housing and retirement living.

The approach is built on an understanding of the “Five Stages of Living”. The first stage is Learn (for 18-25-year-olds), followed by Connect (25-35s), Grow (30-55s), Relax (55-75s) and Re-connect (65-plus).

The investors see a ‘wealth of opportunities’ for student housing, PRS, coliving, and senior living mapped out across key European countries of interest being Ireland, Italy, Spain, Portugal, France, Netherlands, Germany, Denmark, Sweden, and Finland – where the fund’s debut investment has been made.

To invest in the ‘right demographics in the right locations’ is not quite enough as they must also have a sustainable component to aide in the objective of sustainable income together with strong rental growth.

This is not the first time M&G and MN have invested together. M&G was one of the first managers MN invested with as it looked towards a new push for core European real estate in 2015/16. It also invested alongside M&G in Asia real estate.

Asked what impact a European living platform had, M&G’s Greaves said the company had a large UK housing business. ‘We are replicating our knowledge of UK housing according to demographics in the European market based on the infrastructure we have there,' he explained.

‘We see Europe as a really important growth area for our business as a whole.’

‘Everything we do from a housing point of view is driven by socio economic needs of individuals based on their demographics.'

‘When you start to look at the nuances in each country, you see the opportunity that arises’.

DEBUT DEAL 
The first investment is in Helsinki where it has alloctaed €75 mln to a new development 5 minutes’ walk from the central business district. This residential-led mixed project provides 124 premium serviced apartments close to a tram stop at Helsinki’s central station, around which one can find consultants, law firms, and banks.

There is one shared Tesla for residents, some electric vehicle charging points, a wine shop, restaurants, sauna, health & beauty outlets and grocery store on the ground floor.

Concierge service, a roof top winter garden, sauna terrace, and solar panels complete the look and feel of the asset. It comes with the highest LEED Platinum score in its category and the second highest in the world in the same category.

It turns out this whole asset is a redevelopment of an old office block being transformed into something catering to the needs of the local demographic – 25s to 35s – the “Connect group”.

For this fund, any commercial space is allowed up to a certain percentage and it must be accretive to the residential element, in other words, ‘to the benefit of the resident’.

Greaves reveals the fund is working on another project in Dublin with a similar demographic to the Helsinki Art Nouveau building. He also delves into opportunity in Milan, mentioning American students on Erasmus courses. 

PIPELINE
Alongside MN as an investor is an internal client of M&G which has committed €178 mln to the fund. This client is upweighting to alternatives in Europe.

The task of filling out the acquisition pipeline has fallen to a team led in Frankfurt by head of European residential, Marcus Eilers.

Said Greaves: ‘I have to give credit to Marcus and colleagues who are generating an active pipeline. There is still a gap between vendor price aspiration and the desire of the purchaser, so pricing is the biggest sticking point, but it has changed slightly, and I’d argue that in Europe perhaps they are being more realistic. The changing cost of borrowing means people have amended pricing on assets being put into the marketplace.’

Subscribers can access news of the fund here

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