Pictet Alternative Advisors (PAA) is set to launch a new pan-European real estate fund next month focusing on a range of assets due to Europe’s ‘compelling investment opportunities’, the firm says.
The fund will target investments and related companies in offices, light industrial and residential, as well as student and senior accommodation, in 20 ‘smart gateway’ cities across Western Europe including London, Madrid, Berlin and Rome.
Zsolt Kohalmi, global head of real estate and co-CEO of PAA who oversees a 14-strong team, said the pan-European fund was value add in nature and was looking to make ‘mid-teen’ returns. He added a first close had already been held with ‘committed partners’, but declined to provide an overall equity target.
Kohalmi said he was hoping to announce some transactions in the next month, including one in the UK. The fund will focus on the mid-sized segment of the real estate market.
Kohalmi joined the Geneva-headquartered firm in September 2018 having previously served as head of European acquisitions at Starwood Capital Group. Prior to joining Starwood in 2013, he was chief investment officer and co-founder at Meyer Bergman from 2006.
PAA manages €24 bn of assets in hedge funds, private equity and real estate. The real estate component makes up €2.3 bn of total AUM. The company began investing in real estate indirectly in 2011, launching its first co-mingled real estate product a year later. It created a direct real estate team headed by Kohalmi just last year, and the new fund is PAA's first direct real estate vehicle. Seventeen people are employed in the real estate division, which has six offices in the UK, Germany, Sweden, Spain, Luxembourg and Switzerland.
PAA is the wholly owned subsidiary of Pictet Group, which has a total AUM of €440 bn and was founded in 1805.
Kohalmi said he was recently hired because the firm recognised that real estate was an important part of the overall exposure of private wealth as well as institutional clients.
‘Europe has stable cap rates due to continued low interest rates, and is finally seeing rental growth come through, making it in our view, currently the most attractive global market for real estate investment on a risk adjusted basis,’ Kohalmi added. He also said volatility in certain European markets over the coming years, for example the UK due to Brexit, would lead to a variety of entry point opportunities, hence the importance of a local presence in six offices.
Overall, Europe is looking attractive. ‘Occupational demand for real estate has improved during the last two years, as unemployment in the Eurozone sank below 7% for the first time since the recession. This demand increase has led to certain submarkets facing sub 5% office vacancies, which in turn can lead to real rental growth,' he explained.
He likened the approach of the value add fund to ‘Truffle hunting.'
