Pictet debuts in direct real estate with €700 mln value-add fund

Pictet Alternative Advisors has reached its hard cap for its first real estate fund, raising €700 mln of equity for pan-European value-add transactions.

Real Estate Capital - Elevation 1 Fund was launched less than 12 months ago with a minimum target of €400 mln and a target return in the mid teens.

Zsolt Kohalmi, co-CEO of Pictet Alternative Advisors and global head of real estate, said the firm also has several anchor investors who will co-invest alongside the vehicle, if the Pictet real estate team finds transactions which are too large for the fund.

‘We had substantial excess demand, but our goal was not to create a very large fund because then you can feel deployment pressure’ he told PropertyEU.

‘We wanted to be sure we could do single asset transactions - which if your fund is too large can become challenging. This way, we have the flexibility to also do larger deals with our anchor investors should we wish.'

Elevation 1 will invest in gateway cities, with a focus in the UK, Germany, the Nordics and Spain. The 15-strong team will also look in Paris, Milan and Lisbon. All sectors are of interest, Kohalmi said, but it is unlikely the fund will target retail yet.

He said the investors are from Europe, Asia and Latin America and are approximately two-thirds private wealth clients and one-third institutional. The institutional capital is from pension and endowment funds, and the Asian institutional money is ‘predominantly’ from Japan, he said.

The wider Pictet parent group has approximately €540 bn of assets under management across all asset classes with about 60% of AUM from private wealth clients. Kohalmi said the fund-raising for Elevation 1 had mirrored the firm’s wider client base.

‘That is very much a reflection of wanting to create a product that is attractive to both our institutional and our private wealth clients.’

The real estate team, which includes former CBRE Global Investors’ value-add fund manager Charles Baigler and Partha Sarathy who was previously at Marathon, has closed its first three transactions.

One is in Madrid where Elevation 1 bought 62 Castellana from a private family. Built six years ago, the circa 6,000 m2 office building has never been substantially occupied and Pictet intends to bring it up to a BREEAM rating and draw up a leasing strategy.

The other two investments are both light industrial/last mile logistics buildings close to the M25 in London.

‘Like many others, we like last mile logistics because we all understand that it is a sector that is going to grow’, Kohalmi added. ‘We would like to build up a portfolio, I would hope in excess of 20 assets.’

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