The Primonial Group bundles its entire real estate business under one brand “Primonial REIM” and creates a pan-European platform that aims to become a European leader in real estate investment and asset management.
The decision is part of an extensive harmonization and consolidation process that has resulted in the €30 billion real estate asset manager merging all of its different entities under a single umbrella with a single brand, Primonial REIM.
“The old name is actually the new name,” joked Jürgen Fenk, CEO of Primonial’s real estate operations. ‘We are transitioning our entire real estate business to Primonial REIM, an already well known brand with a solid 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 division.’
This is the group’s latest move as part of plans to increase its presence in Europe. The real estate activity, launched in 2011 for the management of SCPI investment vehicles in France, has experienced tremendous growth over the last ten years, leading the group to quickly become one of the largest asset managers, first in France and more recently also in Europe.
With an ambitious growth program across the continent, the company is now targeting around €44 billion in assets under management by 2024. “While we have a strong regional spread in France, the backbone of our business, we are aiming to expand into several European markets, starting from Germany, where we see the greatest potential for growth despite the strong competition in the market. We will try to repeat 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 intends to expand further. ‘We will advance into new asset classes primarily through club deals. We want to implement a multi-asset class strategy in the country.’
A KVG license to offer products for private customers is also in the works. Fenk: “We will apply for a license for two reasons, firstly we offer new products to retail clients, secondly we can serve local institutional clients who prefer to invest in a German regulated environment rather than investing through a Luxembourg regulated entity [which we already have].’
Once the license is secured, the company plans to launch new healthcare real estate funds for both institutional and retail investors. ‘We want to offer interesting products for local investors and at the same time offer Europe-wide funds for European and non-European investors,’ says Fenk.
Primonial REIM is currently evaluating the opening of an Asian office in Singapore to increase its fundraising activities in the region, which currently make up a small but not irrelevant part of its institutional fundraising activities. “It would allow us to be closer to our Asian customers,” Fenk said, adding that the office opening is subject to the easing of travel restrictions and other approvals that have yet to be obtained. ‘Travel restrictions have restricted Asian investors’ access to European real estate over the past year, but we are now seeing the appetite for Europe returning.’
Primonial REIM’s pan-European funds offer various investment solutions. Managed by Primonial REIM Luxembourg, they include ESI, a European fund focused on healthcare real estate targeting €1bn, and its first build-to-rent fund (Perf II), which has assets in value of €400m under management following an initial investment in Spain through a joint venture with Grupo Lar, a local developer, in mid-2020. The fund is also targeting €1bn in size through investments across Europe.
Another catalyst for Primonial REIM’s future growth will be the company’s recently announced collaboration with Hova Hospitality. The transaction marks the start of an ambitious growth program in the European hospitality asset class, which will complement the portfolio, which is currently primarily focused on offices and healthcare. “We already have a sizeable pipeline of €1 billion worth of hotel deals that we are currently reviewing,” commented Fenk. He expects Primonial REIM’s exposure to the sector to be “significant”. “When we go into the sector where we want to make a difference, we don’t just go in for 200 to 300 million euros.”
In fact, Primonial REIM’s targets for the sector are “comparable” to the healthcare asset class, where the company is currently the leading player with €9bn in assets under management. ‘We’ll start with one or two club deals, and later we’ll certainly set up a pan-European hotel investment fund,’ says Fenk.
As part of a first strategic partnership signed over the summer, Primonial REIM has engaged Hova Hospitality to provide advisory services for the acquisition of hotel properties in Europe and to support the management of hotel properties that Primonial REIM already owns, valued at around €900 million. Hova Hospitality is the new company founded by Dominique Ozanne, former CEO of Covivio Hotels, and transformed into Europe’s largest publicly traded hotel investment firm. Together with Gaël Le Lay, Deputy Chief Executive Officer of Hova, he has completed hotel acquisitions valued at over €13 billion across Europe.
Fenk says the decision to get into hotels is partly driven by Covid and partly in response to investor interest in the asset class at a time when several operators are looking to sell to free up cash. “Whereas the hotel asset class is not under as much pressure [from the Covid-related travel restrictions] As we initially thought, many operators have seen their debt burdens rise sharply and are looking to divest assets. At the same time, operators are also consolidating and in the process will also free up assets in the market.’
The investment strategy will focus on green buildings as part of Primonial REIM’s ESG presence at both corporate, fund and asset level. Primonial REIM is currently working to outline a global ESG approach to be rolled out across its various entities and portfolios in order to position itself ahead of the 2050 goals set out in the Paris Agreement.
The French arm already uses an environmental rating for the entire French portfolio and the whole company aims to expand to the other real estate companies in the short term. Fenk: ‘ESG for us is a belief, not a marketing speech and we are currently defining what could be possible at the real estate platform level.’
Although Primonial REIM itself is on a growth course, the planned merger with the French real estate developer Altarea should give the Primonial Group another big boost. The Paris-based publicly traded group announced over the summer that it had entered exclusive negotiations with Primonial shareholders and management to take full control of the group by 2024, in a deal that would value the deal at $1.9 billion Euro valued with no potential earn outs. Altarea will acquire 60% of Primonial’s equity in Q1 2022 and the remainder in Q1 2024 (scope excluding La Financière de l’Echiquier).
Although Fenk could not comment on the ongoing process, he said the operation will have no impact on the company’s strategy or its management team, which will remain unchanged after the transaction. Management is also expected to retain decision-making autonomy within the new group. ‘As the deal with Altarea is ongoing, there is not much I can say other than that this is a growth-driven process that generates operational synergies for both groups.’
Fact file Primonial REIM
MANAGED ASSETS: €30 billion
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