Primonial Group is bundling its entire real estate business under one brand, ‘Primonial REIM’, and creating a pan-European platform which aims to become a European leader in real estate investment and asset management.
The decision is part of a major harmonisation and consolidation process which has seen the €30 bn real estate asset manager bring all the different units under a single roof with a single brand, Primonial REIM.
‘The old name is, in fact, the new name,’ joked Juergen Fenk, CEO of Primonial’s real estate activities. ‘We are rebranding our entire real estate business to Primonial REIM, which is already a very well-known brand boasting a good reputation across Europe. We will then have Primonial REIM France, Germany, Luxembourg and Italy, depending on the country, as well as a holding company for our real estate asset management arm.’
It is the latest move by the group as part of plans to step up its European presence. The real estate activities which were launched in 2011 for the management of SCPI investment vehicles in France, have experienced tremendous growth over the past decade, leading the group to emerge rapidly as one of the largest asset managers first in France and more recently, in Europe.
It is now targeting roughly €44 bn of assets under management by 2024 via an ambitious growth program across the continent. ‘While we boast strong regional distribution in France, which is the backbone of our business, we are looking to expand across several European markets starting from Germany, where we see the highest growth potential despite the strong competition in the market. We will seek to replicate in Germany the success story we had in the French market,’ Fenk told PropertyEU.
In Germany, the group has so far been very active in the healthcare sector but is looking to expand further. ‘We are going to enter new asset classes, mainly through club deals. We want to implement a multi-asset class strategy in the country.’
A KVG license to offer products for retail clients is also in the works. Fenk: ‘We will file a license application for two reasons, the first one is offering new products to retail clients, the second is being able to service local institutional clients that prefer to be in a German regulated environment rather than investing through a Luxembourg regulated entity [which we already have].’
As soon as the license is secured, the company plans to launch new healthcare property funds both for institutional and retail investors. ‘We want to offer interesting products for local investors and at the same time offer pan-European funds for European and non-European investors,’ Fenk noted.
Primonial REIM is currently evaluating the launch of an Asian office in Singapore to boost its equity raising activities in the region which currently make up for a small yet not irrelevant part of its institutional fundraising activities. ‘That would allow us to be closer to our Asian clients,’ Fenk said, adding that the office opening is dependent on the ease of travel restrictions and other permits yet to be obtained. ‘Travel restrictions have limited Asian investors’ access to European real estate over the past year, but we see appetite for Europe coming back now.’
Primonial REIM’s pan-European funds offer several different investment solutions. They are managed by Primonial REIM Luxembourg entity and include ESI, a European fund focused on real estate healthcare, which is targeting a €1 bn volume, and its first build-to-rent fund (Perf II), which manages assets worth €400 mln following a first investment in Spain through a joint venture with Grupo Lar, a local developer, in mid-2020. The fund is targeting a €1 bn size through investments across Europe as well.
Another catalyst for Primonial REIM’s growth going forward will be the company’s recently-announced tie-up with Hova Hospitality. The operation marks the start of an ambitious growth program in the European hospitality asset class, which will complement its portfolio, currently largely focused on offices and healthcare. ‘We already have a substantial pipeline of €1 bn of hotel deals we are currently studying,’ Fenk commented. He expects the Primonial REIM commitment to the sector to be ‘substantial’. ‘If we are entering the sector we want to make an impact, we are not going in for just €200-300 mln.’
In fact, Primonial REIM’s goals for the sector are ‘comparable’ to the healthcare asset class, where the firm is currently the leading player with €9 bn of assets under management. ‘We are starting with one or two club deals but later on we will certainly set up a pan European hotel investment fund as well,’ Fenk noted.
Under an initial strategic partnership signed over the summer, Primonial REIM has mandated Hova Hospitality to provide advisory services for the acquisition of hotel assets in Europe and support for the management of hotel assets already held by the Primonial REIM valued at some €900 mln. Hova Hospitality is the new company founded by Dominique Ozanne, the former CEO of Covivio Hotels, which he created and transformed into Europe’s largest listed hotel investment firm. Together with Gaël Le Lay, Hova’s deputy Chief Executive Officer, he has carried out over €13 bn of hotel acquisitions across Europe.
The decision to enter hotels, said Fenk, is partly Covid-driven and partly a response to investor interest in the asset class at a time when several operators are looking to sell to release cash. ‘While the hotel asset class is not under so much pressure [from the Covid-related travel restrictions] as we initially thought, it is true that many operators have experienced a sharp rise in their debt burden and are looking to divest assets. At the same time, operators are also consolidating and in the process, they will release assets on the market as well.’
The investment strategy will be focused on environmentally-sustainable buildings, as part of Primonial REIM’s ESG push both at a corporate, fund and asset level. Primonial REIM is currently working on outlining a global ESG approach to roll out across its different entities and portfolios to position itself ahead of the 2050 goals set out in the Paris agreement.
The French arm already makes use of an environmental rating for the entirety of the French portfolio and the company as a whole is looking to extend this to the other real estate entities in the short term. Fenk: ‘ESG is a conviction, it is not just marketing speech for us and we are currently defining what it could be possible to achieve at the real estate platform level.’
Although Primonial REIM is on a growth trajectory by itself, Primonial Group is expected to be given yet another major push through the planned merger with French property developer, Altarea. The Paris-based listed group announced over the summer that they entered exclusive negotiations with the shareholders and management of Primonial with a view to taking full control of the Group by 2024 in a deal valuing the business at €1.9 bn, excluding potential earn-outs. Altarea will acquire 60% of the capital of Primonial in the first quarter of 2022 and the remainder in the first quarter of 2024 (scope excluding La Financière de l’Echiquier).
Although Fenk could not comment on the ongoing process, he said the operation will not have any impact on the company’s strategy or on its management team, which will remain unchanged following the deal. Management is also expected to retain decision-making autonomy within the new group. ‘As the deal with Altarea is not closed yet, I cannot say much except that this is a growth-driven process generating operating synergies for both groups.’
Fact File Primonial REIM
ASSETS UNDER MANAGEMENT: €30 bn
NUMBER OF INVESTORS: >80,000
NUMBER OF INVESTMENT FUNDS: 61
NUMBER OF BUILDINGS: 1,433
NUMBER OF TENANTS: 7,170
REGIONS ACTIVE: 9 European countries