Amundi Real Estate plans to launch a healthcare product and to diversify into residential in a bid to rebalance its heavy weighting in core offices.
The refocus is driven by Marc Bertrand, the new CEO who took over from Jean-Marc Coly at the end of 2020.
More than two-thirds of the French asset manager’s €41.7 bn property AUM is invested in big office blocks, with the balance mainly in retail and some hotels.
Bertrand said that while the business model of deploying billions of euros of mainly retail funds capital rapidly into large office buildings had been ‘tremendously successful’ in the past, it no longer met many investors’ aspirations.
Amundi is also trying to develop more real estate fund products for institutional investors.
‘Our success was based on a single strategy,’ he told PropertyEU. ‘But investors want new stories and new concepts: in residential, in social impact strategies. So we need to renew and launch new products.’
Bertrand said another reason to be more innovative was to capture the value in long-term cash flows which the Covid pandemic had highlighted. ‘If you compare corporate bond yields and very well-leased real estate assets, the long leases are good value for money.’
Many competing real estate asset managers have already shifted more focus and resource to ‘beds and sheds’. At the same time, there is caution around the future performance of the office sector since the acceleration of flexible working triggered by the pandemic.
Bertrand is keen to move as fast as possible. He said a priority is to launch a dedicated healthcare strategy soon.
He added: ‘The healthcare sector has proved it is an asset class in which the long leases and the cashflows are very resilient. It makes sense in terms of cashflows and occupier demand and on the other hand it makes sense for both retail and institutional investors - especially the latter - in terms of social impact and ESG considerations.’
Exploring ways to invest in the residential market at scale is his other priority. He said Amundi’s focus will be on the affordable middle class housing bracket.
Office investment will continue, in the best city locations in countries where the group is already present, which now includes Poland and Ireland. Bertrand said income returns had been resilient during Covid with a 5% fall in rent recovery but it was important to stay focused on asset management.
‘We need to refocus on asset management because we all know that we will have to compete in the rental market to have good occupancy rates.’
Amundi’s largest single investment is the 159,000 m2 Coeur Defense office complex in Paris’s La Defense, a submarket ‘now being questioned by investors’ because take up is falling at a time of increasing supply. He said the vacancy rate in Amundi’s La Defense assets was below 10% and the rental levels in Coeur Defense ‘are still very solid'.
The group owns a €400 mln logistics portfolio, comprising French assets and Zalando’s building in Lahr in Germany, near the French border. Through a partnership with specialist French developer Panhard, Bertrand expects to buy more properties but not to set up a dedicated fund.
The capital raising target in 2021 is €2 bn, split approximately equally between retail funds and institutional investing. Some sales are planned, with likely total investment this year of €2.5 bn.
Most institutional AUM has been via clubs and separate account deals but Bertrand hopes to push Amundi Real Estate European (AREPE) this year, and to convert the closed-end, pan-European vehicle to an open-ended fund.
Another office-focused French asset manager, Perial Asset Management with €5 bn AUM, told PropertyEU this week that it plans to diversify and increase exposure to new alternative asset classes such as care homes and student housing.
