US investor and asset manager PGIM Real Estate is continuing its hunt for properties in Europe with strong ESG credentials, portfolio manager Christine Fritz told PropertyEU at Mipim.
Last year, the firm clinched one of the biggest office deals in the Netherlands when it purchased the European headquarters building of tech giant Oracle for €75.3 mln, according to data filed with the Dutch Land Registry.
‘It is a historic, refurbished building in Amsterdam with close to net zero emissions,’ said Fritz, who manages the portfolio of PGIM Real Estate’s Europe Core Fund. ‘It is exactly the kind of property that we are looking for.’
PGIM Real Estate has over €10 bn directly invested in Europe. The Core Fund itself looks to invest in Europe’s liquid markets, in particular Germany, France, Italy, the Netherlands and the UK. Other markets on the radar include the Nordics and Spain. PGIM Real Estate’s value-add strategy, which takes a little more risk than the Core Fund, has already invested in the logistics sector in Spain.
PGIM Real Estate has three European real estate equity funds: Core, Core Plus and Value Add. For the Core Fund, American-born Fritz, who is based in Germany and has lived in Europe for over 20 years, targets logistics, office, residential living, senior and student housing as well as micro-living in strong locations, especially in growing cities.
The firm continues to focus on high conviction investment themes centred around the '3Ds': digitalisation, decarbonisation (ESG) and demographics. Using these three pillars, it identifies sectors, markets and opportunities with high growth potential across all asset classes and investment strategies. Its predilection for sectors touched by demographics, digitalisation and decarbonisation is ‘why we like the Netherlands so much,’ Fritz said.
Approximately 40% of the core fund’s assets consist of logistics properties. According to Fritz, the tenants of logistics properties are drivers of ESG. ‘Users are asking for solar panels,’ she said. ‘For a long time it seemed the segment was behind but now they are ahead of other segments. For instance, any addition they want at their distribution centres usually includes solar panels and increased sustainability. They want to be carbon-positive.’
PGIM Real Estate is not only working to lower energy usage, it is aiming for net zero and more. ‘We want to move even beyond that,’ Fritz noted.
PGIM Real Estate is also active in the UK, where a new law enforces biodiversity requirements for buildings. Not only does PGIM Real Estate’s Fritz want to go in that direction for her fund strategy, she also welcomes the UK model to quantify biodiversity. ‘We are looking at how we could use this for assessing all our properties where biodiversity is involved,’ she said.