Corestate swings back to core-plus after opportunistic spending spree

Zug-based private equity company Corestate is reinventing itself and switching its focus to core-plus assets as it broadens its investment focus, chief investment officer Thomas Landschreiber told PropertyEU.

Since the outbreak of the financial crisis, the company has focussed on club deals, he noted. ‘When the crisis broke out, it became a problem to raise discretionary money for fund vehicles. That’s why we started doing club deals. Investors like to see what sort of deal they’re investing in. That’s what we’ve done since the Lehman crisis.’

During that period, the Swiss investor amassed up to €1.5 bn in residential portfolios and just in the past year, it has sold off a similar amount, Landschreiber noted. ‘We saw that it was time to exit the portfolio and have sold off assets worth €1.5 bn in the past 12-14 months. It was a good time to sell residential portfolios. On average our club deals achieved an IRR of 29% per annum.’

While the initial focus was on the opportunistic side of the spectrum, Corestate is now looking at core-plus, Landschreiber said. ‘Now that we have transferred the money back to our co-investors, we are changing our investment model again. But we are sticking to the club deal approach and have lined up around 200 investors to join us as co-investors.’

BROADER FOCUS
Some of the investors include Swiss-based institutional players, as well as private equity, family offices and ultra high net worth investors from Singapore and other parts of Asia. Listed private equity company Partners Group is also a client, Landschreiber said. He added that the investment focus has now broadened to include commercial assets in smaller cities in pedestrian zones.

‘We’re looking at the Netherlands and Spain; and we’re looking at everything, also commercial assets including offices and retail.’

One of the reasons for moving out of opportunistic residential portfolios was the new competition from listed companies such as GSW and Deutsche Wohnen. ‘These investors have access to cheap money from the stock exchange, we can’t compete with that.’

That is not to say that Corestate has moved out of residential altogether, he added. ‘We are still active in resi and own and manage 20,000 units thanks to our access to cheaper money from insurers and pension funds.’

The company is also looking at residential development, in particular in Germany and Austria, Landschreiber said. ‘That’s quite an interesting area and we already have a small development team. When you add development money, you can add real value, also through the marketing and sales.’

Development is not on the agenda though in the Netherlands. ‘We are looking closely at the municipal stock that the housing corporations are selling off. We’re still in the research phase and are now considering the next phase. If we become active, then it should be within the next 12 months.’

However, commercial development is on the cards in the Netherlands as well as Spain, he added. ‘We’re looking at four or five ideas, and I think we will do two or three of these.’