Partners Group switches investment focus to living and logistics

Partners Group, the Zug-based global asset manager specialised in private markets, is switching its thematic investment focus towards living and logistics while becoming more and more selective about offices.

‘We are rebalancing our portfolio towards new sectors where we have developed considerable expertise over the last few years,’ Rahul Ghai, co-head Private Real Estate Europe told PropertyEU in an interview. ‘We have hired a number of people with specialist skills and strengthened the value creation team. Some of the investment themes we are currently focusing on include build-to-rent, purpose-built student housing, last mile and urban logistics.’

These are the sectors which currently offer the “best relative value”, added Ghai. ‘We started investing in logistics about three years ago and have been expanding strongly. This is a sector where we are seeing growing demand for higher quality products and a continued need to replace old stock. We are also focusing on the living sector, where there is a fundamental shortage of supply across many key markets. There is also a fundamental affordability issue. In particular, we have made some investments in student housing in the UK, and we are very keen to pursue this segment, which benefits from long-term tailwinds such as favourable population growth trends and rising enrolment rates.’

In June the firm joined forces with Host Student Housing to launch a £1 bn (€1.2 bn) UK student housing and co-living investment venture. The partnership was seeded with two Host-owned operational purpose-built student accommodation (PBSA) assets in Leicester and Colchester, a PBSA development project in Bournemouth and a purpose-designed co-living development project in Guildford.

The partnership has a pipeline of over £250 mln of PBSA developments totalling more than 1,000 beds in the prime Russell Group university markets of Manchester, Bristol, Edinburgh and Birmingham.

Partners Group also backed Greystar a couple of years ago to develop an approximately 900-apartment rental residential and student housing complex in Vienna. ‘I have been involved with this sector for over 10 years and think it is a really interesting asset class,’ commented Peter Holden, co-head Real Estate Asset Management at Partners Group. ‘It offers demographic and countercyclical resilience because while the number of 18-25 year-olds is expanding, people tend to stay longer in education as the employment market becomes more challenging. It is, however, important to focus on those cities which are seeing growing student numbers such as London, Bristol, Edinburgh, Manchester, Glasgow or Birmingham, just to name a few.’

Since the movement of European students to the UK has become more challenging post-Brexit, the firm is also looking positively at a number of European cities with strong Anglophone courses such as Dublin and Cork, but also throughout the Netherlands.

OFFICE EXPOSURE

When it comes to investing in offices, Partners Group has become more selective over the past few years although the sector still makes up for about 40% of its global portfolio. ‘There has been a shift in the office space and what used to be an acceptable facility is no longer so because tenants have become much more demanding. We will continue investing in offices but will become more selective, focusing on improving amenities and energy efficiency as well as obtaining top sustainability ratings. We will also be more selective when it comes to locations,’ Ghai said.

Partners Group, which has a climate change strategy, is understood to be working towards a carbon reduction strategy for its private real estate business in line with the Paris agreement. Holden said: ‘ESG is integrated throughout our investment processes and value creation plans. We are focused on decarbonising our assets and working towards net zero. We need several carbon reduction programmes given the different legislative codes in the US and Europe. As assets will get traded, we are focused on improving carbon footprints during our period of ownership and making assets attractive for the next buyer. We have been working on a carbon reduction strategy over the past 12 months.'