The real estate investor with €33.5 bn AUM is seeding the soon-to-be-launched open ended vehicle with a portfolio of around €150-€250 mln of existing assets. Over time, the upcoming fund could grow to as much as €2 bn, PropertyEU has learned.

The advisor to the new fund will invest in all residential asset classes and sub asset classes in the main European countries, with an emphasis on those markets where the group has existing teams and JV partners, primarily France, Germany, Italy, and Spain.

During Expo Real, Primonial REIM is not only informing market players about the incoming urban living fund but on a range of initiatives. These all add up to the company’s transformative mission from being a French-based player created in 1989 and whose real estate investment business, Primonial REIM France, was created in 2011, to becoming an integrated, asset-diversified pan European investment manager.

The company has a presence in France, Germany, Italy, Luxembourg, Singapore – and, since April 2022 - London.

Numerous hires have taken place over the past two years, including CEO Juergen Fenk who joined in March 2021 from Austria’s Signa, plus Stephane Marguier who joined earlier this year. Other newcomers are Sandra Burrows, Peter Finkbeiner, Alexander Tilson, and most recently, an international development team.

Strategic goals
In an interview with PropertyEU, Fenk said key strategic goals being talked about during Expo Real were the launch of several Luxembourg-based funds, raising equity from international institutional investors and deploying capital both inside France and across Europe.

This boils down to pursuing four strategies: investing in France for retail investors as it has been doing for years; investing across Europe for these same retail funds – something it will do more of especially in asset classes such as healthcare and residential; attracting new international investors; and launching more pan-European vehicles.

Apart from the new urban living fund, the company aims to launch two other funds at year-end or the beginning of 2023. It is moving slightly from a core strategy towards core plus.

In terms of asset classes, Primonial REIM is already one of the largest investors in healthcare. ‘This is an area where we believe that any correction in the marketplace will not have as strong an impact as in other asset classes,’ said Fenk, ‘and we are extremely well equipped in this field’.

He also said hospitality assets were something the firm was focussed on, as well as offices. But for offices there will be a different play around ESG and decarbonisation.

Valuations
Fenk said the timing of the Munich trade show this year was interesting in the sense that, ‘everybody knows where we are, but nobody knows how it will all play out over the next two months’.

Fenk said he was thinking much about valuations, and the joint issue of inflation and interest rate rises.

‘What is uppermost in my mind is where we are going to see decreases in valuations.’

‘We probably have to expect higher interest rates, and in the transaction market I do not think that is all (priced) in there. So, we only see a few transactions in Germany, and not so much in France, where we have seen the first sellers accept a lower price. But that is not across the entire spectrum of the market yet. I believe in the next two or three months that something has to happen. It could be difficult for some players in the industry.’

Denominator effect
He said institutional investors were really ‘on hold’ at the moment given the denominator effect. That said, his company is looking to work with investors seeking a better risk return profile than bonds.

Fenk does not see a pullback of retail investors. This year, the company raised more from retail investors compared to the previous one, aided by a strong distribution team, he noted.

‘The one thing we see, though, is on the ESG theme. Sustainability has really come into it. It is not just the institutional world that is looking for Article 8 or 9. It's really also the classical retail client,’ he said.