Allianz Real Estate plans to invest a further €2bn-€3bn of equity into global residential property in the coming two to three years.
The investment manager has set the target as its preliminary figure for equity deployed in Europe in the private rental sector in 2021 reached €1.2 bn, out of a total of almost €3bn invested in this sector globally last year.
The 2021, €1.2 bn European figure does not include Allianz’s €770 mln of equity to buy into a Swedish joint venture with Heimstaden Bostad. That deal, which secured a 56.25% capital share of a €3bn portfolio of 9,300 homes in Stockholm and Malmo for Allianz clients, closed a few days ago.
The Swedish transaction included a further €120 mln of investors’ cash which will be used to bring the properties in the portfolio in line with the Carbon Risk Real Estate Monitor (CRREM) decarbonisation “pathways”.
Annette Kröger, CEO North & Central Europe at Allianz Real Estate, said that while ESG considerations regarding energy consumption and emissions were now ‘prominent during due dilligence for most deals, and factored into business plans’, the cost was not yet being reflected in asset pricing.
‘(Pricing) is also about where the market stands. To date we have not seen pricing reducing’, she said. For PRS, she continued, ‘it is quite the opposite. There is no market evidence of it happening at this point. Looking to the future, as future-proofing assets continues to be an issue, it may.’
The average year that properties in the Heimstaden portfolio were built was back in 1944, with the last major refurbishment in 1958.
Allianz’s global ESG targets are to cut its real estate carbon footprint by 25% by 2025 and to be net-zero by 2050.
Kröger said the PRS’s long-term, stable and diversified cash flows ‘fits the objective of core investors’ and Allianz saw the regulated market in Sweden as a positive factor in this respect.
The residential sector had proved highly resilient during the pandemic, she added, ‘with lower vacancies and better risk-adjusted returns compared to commercial real estate’. Allianz particularly likes affordable and mid-market rental housing.
European investments last year included an affordable housing portfolio in Germany, in Nuremberg in Bavaria. The acquisition was a €135 mln off-market forward purchase from developer Schultheiss Projectentwicklung, and Kröger expects expansion in Germany most likely to continue to be piecemeal: ‘We prefer to create new space there through developments.’
In the UK, Allianz clients continue to invest in PRS via the Door Fund, alongside Oxford Properties and Delancey. The fund has a large stake in Get Living, which is co-owned by APG and Qatari Diar. It has a pipeline of homes at its existing East Village and Elephant & Castle assets in London, and in Manchester.
Spain a target
Another European PRS investment last year was Allianz’s first equity investment in Spain. The group bought the residential company Elix Vintage from KKR and Altamar Capital Partners for €140 mln. The business and Elix’s 21 assets with 421 units were valued at €250 mln (gross).
According to sources in Spain, Allianz is also currently in negotiations to acquire a second Spanish PRS portfolio. Globe Invest is selling the 560 homes in a deal tipped to be worth €200 mln.
Kröger declined to comment on the report but said: ‘Spain is a target in general for us.’
The Spanish properties are in Madrid and Barcelona. Allianz ‘believes in continued urbanisation in key cities ‘, she said, which will continue to create opportunities, heightening imbalances between demand and supply.
In the US last year, Allianz Real Estate invested $300 mln into single family rental vehicle, the Upward America Venture, managed by Lennar. And in Japan it boosted its multi-family portfolios, spending $100 mln on a portfolio of 24 assets in Tokyo, followed at the end of the year by a first close alongside Ivanhoé Cambridge.
Allianz Real Estate Asia-Pacific Japan Multi-Family Fund I, a $2 bn, closed-end fund will build a diversified portfolio of multi-family residential assets across Japan’s top tier cities.
By September 2021 Allianz Real Estate’s global residential assets under management stood at €9bn, and the final 12-month December 2021 figure is expected to be closer to €10bn.
