INTERVIEW: BNP Paribas banks on Europe

Thierry Laroue-Pont, the new head of BNP Paribas Real Estate, is as non-conformist as the Paris-based company he runs.

BNP Paribas Real Estate is an unusual beast in the European real estate jungle. For a start, it encompasses the full range of disciplines in the property spectrum from development, transaction, consulting, valuation, property management and investment management. And second, unlike all other leading brokerages in Europe, it is owned by a bank.

Add to that its French origins and you end up with an animal that looks like none of its peers in an industry dominated by Anglo-Saxon heavyweights. No wonder many British brokers look at the Paris-based company as something of a curiosity.

But CEO Thierry Laroue-Pont is too busy with strategic affairs to worry about how his international peers perceive the company he runs. He readily concedes that no other bank in Europe has had the idea of creating such a business model 100% owned by a bank and that some people may even think it’s ‘unusual’. ‘But it has great advantages to have the support of a banking network for acquisitions, for our development plan and external growth. And our close relationship with BNP Paribas also helps our clients gain access to all the banking and financial services surrounding a real estate transaction or development.’

Banking origins
While the classical brokerage firms have traditionally had a strong focus on consulting and valuation, BNP Paribas Real Estate has evolved in a different way. Following the merger of the BNP and Paribas banking groups in 2000, each of the two entities had some property subsidiaries but the focus was on France and on three main business lines: property development, property management and investment management.

The acquisition of Atisreal in 2004 added a pan-European dimension as well as a solid platform of standard property services including transaction, consulting and valuation. The group had been formed the previous year by the amalgamation of three European surveying firms: Auguste-Thouard in France, Müller in Germany and Weatherall Green & Smith in the UK. The different units were merged into a single property department called BNP Paribas Immobilier which was subsequently renamed BNP Paribas Real Estate in 2009 in line with the group’s international ambitions.

And those ambitions are big, Laroue-Pont told PropertyEU during an interview at the company’s headquarters in the Paris suburb of Issy-les-Moulineaux. ‘It’s not in our DNA to duplicate what others are doing. But we do want to create a one-stop global shop for our clients that brings creation value to real estate products.’

In many ways, Laroue-Pont is the embodiment of the company he manages. Described in a recent interview with French real estate journal BusinessImmo as an ‘impeccably dressed non-conformist’, Laroue-Pont has taken some turns during his career that even surprised his left-leaning family. The son of a teacher of Russian and German, Laroue-Pont is as conversant in English as his mother tongue thanks to a 17-year stay with JLL and its predecessor company Jones Lang Wootton, including a stint at the company’s London office. Laroue-Pont combines stylishness with the internationalism that is often lacking among some of his home-grown peers, one former colleague who asked to remain anonymous said. ‘Therry is very smart, but also very warm and open-minded. He is part of the furniture here in France.’

Laroue-Pont is also passionate about the company’s unique mix of services. While BNP Paribas’ Dutch peer ING was forced to strip away the bulk of its real estate activities – ING REIM was divested to CBRE Global Investors in 2011 while ING Real Estate’s development business is currently being wound down – the French bank feels comfortable with its real estate arm, Laroue-Pont maintained. There are risks associated with development and transaction activities, but these have been minimised, he argued. The group exercises caution in its strategy, he added.

‘Roughly 40% of our income is recurring income, from consulting services, valuation, property management and investment management. The non-recurring business like investment transactions and development account for the remainder. Also, the beauty of our commercial and residential property development activities is that the cycles do not run parallel. Residential is far less cyclical. And there is an advantage in having development as part of the mix: although it accounts for just half of our turnover, it generates two-thirds of our profits.’

Laroue-Pont concedes, however, that development is not for everybody. ‘You need access to capital and you need to know the market extremely well. That is even more true of residential developments which are so closely linked to GDP growth, employment rates and consumer confidence. But we have very professional teams and are very selective in launching new products. We never launch a development before it is 35% pre-let. We have an extremely cautious risk management approach.’

Investment management is also generating a rising share of income. BNP Paribas Real Estate significantly boosted its investment management unit in 2013 with the takeover of German fund management specialist iii-investments. The company manages pooled funds for over 100,000 institutional and retail clients and operates 84 vehicles or mandates in Europe. It also provides fund administration services and offers separate accounts.

Next phase in its evolution
Thanks to its strong cash flow, BNP Paribas Real Estate is gearing up for the next phase in its evolution. One of the cornerstones is a presence in the leading global markets outside Europe, Laroue-Pont said. ‘The European real estate investment market is being driven by non-European investors. Asian and Middle Eastern investors in particular have a very strong appetite. That is why we have set up platforms in Hong Kong and Dubai.’

While the leading international advisers like CBRE, JLL and Cushman & Wakefield rely on their own brokerage networks across the regions, BNP Paribas Real Estate sources capital through its banking network. ‘Our banking group has almost 10,000 people in Asia and the Middle East. They have had relationships with these potential investors for over 20 years.’ There is no need to grow the real estate business further in these regions, he added. ‘We want to be the best in class in Europe. We would rather focus on that than have a big global appetite.’

Interest in European real estate continues to grow from these two corners of the world, Laroue-Pont added. ‘I recently had several meetings with potential investors from these regions and all of them show strong appetite for assets in London and on the Continent, first Germany and then France. Some of them are interested in moving out to regional cities and further afield to countries like Spain and the Netherlands. We’re also seeing more appetite for diversification away from offices to retail and logistics.’
It is precisely in the three core countries in Europe that BNP Paribas Real Estate has a strong presence.

According to PropertyEU’s latest top brokers ranking, the Paris-based company is market leader in its home country in terms of investment transaction advisory and one of the top three players in neighbouring Germany. It has a less prominent position in the UK, which is dominated by a number of local heavyweights as well as the Anglo-American giants, and ranks eighth there according to our latest figures.

But that is set to change, Laroue-Pont pledged. ‘We have a very ambitious plan for 2015 and want to recruit 150 new people in the UK, France and Germany. We want to belong to the top five in the UK. The prospects for our activities there are extremely positive in terms of GDP forecasts, office take-up, investment volumes and our ability to source capital and bring it to continental Europe. I’m also optimistic about Germany; the economic forecast for this year has been upgraded from 0.9% to 1.5%. And even in France, where GDP growth is close to zero, we have boosted our investment activities in retail and logistics. That was a great effort from the team.’

In that context, one of the ambitions for 2015 is to create pan-European retail and logistics platforms based in London. ‘We believe there is a lot of potential for our retail and logistic strategies with dedicated international teams for sovereign investors.’ The new retail and logistics platforms are scheduled to become operational between June and September this year, he added. ‘It’s great to have good ideas, but you have to walk the talk.’

Bolstering the investment management division is a key goal, he added. ‘In the past few years, we have more than doubled our assets under management from €9.7 bn to €20.3 bn. But we want to go to €30 bn. There are lots of synergies between our leasing, investment and property management activities.’ Organic growth is a priority, but Laroue-Pont is not ruling out acquisitions. ‘We are trying to move the barriers and our frontiers. The expansion of our leasing management services and outsourcing for big corporate clients is another major initiative we’re working on.’

Off-market approach
In terms of investment advisory services, BNP Paribas Real Estate offers a flexible and agile approach, Laroue-Pont said. ‘We have access to opportunities that are not in the market, to create value, streamline and stabilise new assets. None of our competitors can offer that. Many of the global investors we work with like our off-market approach as they prefer not to get into a bidding competition. At the same time, we do have to deliver. We are introduced to our clients by senior BNP Paribas bankers who have longstanding relationships with these investors. But because we are also able to provide access to finance facilities and debt structuring specialists, there is a lot of trust.’

So far, the company has shown it can deliver, Laroue-Pont said, pointing to deals worth €3 bn that it advised investors from Asia and the Middle East on during 2014. Earlier this year, the company announced it had advised the Abu Dhabi Investment Authority (ADIA) on the acquisition of the Ecowest office development project that it is developing at Levallois-Perret near Paris for €477 mln.

The move will see ADIA significantly strengthen its presence in the French market where it already owns several offices through its Docks Lyonnais unit. ‘This first major transaction of the year 2015 is the sign of the dynamism and the attractiveness of the Parisian market,’ Laroue-Pont said at the time. ‘The teams of BNP Paribas Real Estate are particularly proud to have, during the past months, partly rented, begun construction work and sold Ecowest. It is a new example of the relevance of our balanced business model.’ Part of the office complex has been pre-let to French cosmetics giant L’Oreal.

In an even bigger deal last year, BNP Paribas Real Estate advised the Olayan Group from Saudi Arabia, in association with Chelsfield, on the acquisition of the Etoile Portfolio of nine assets totalling 76,000 m² in Paris’ golden triangle for a combined €1.2 bn. The assets were purchased from listed Italian real estate company Risanamento. The company’s transaction teams are mandated to let the remaining vacant spaces and BNP Paribas Real Estate Property Management will manage the nine buildings, Laroue-Pont said. ‘This transaction is one of the largest to be carried out in Ile-de-France and the third-largest in Europe in 2014. It is a perfect illustration of the synergies between our company’s various business lines and BNP Paribas.’


Personal profile
Thierry Laroue-Pont was appointed chief executive officer of BNP Paribas Real Estate on 1 July, 2014. Prior to that, from 2012, he served as deputy CEO and member of the management board; as executive chairman of BNP Paribas Real Estate Advisory (transaction, consultancy and valuation), (2010-2014); and vice-chairman of BNP Paribas Real Estate Advisory (2007-2010). Laroue-Pont joined the company in 2004 as head of the office section for Ile-de-France (Paris and surrounding region) before becoming deputy chief executive in 2005. He started his career with Jones Lang LaSalle in 1987, where he worked as a consultant, sales manager, associate partner, European partner and head of the Agences France department. Laroue-Pont is a graduate of the Paris Institute of Political Studies, has a master’s in law and a post-graduate degree in international law.

Judi Seebus
Editor in chief