French group Primonial has announced the launch of a new European open-ended real estate fund targeting €1 bn of social infrastructure assets. The vehicle, named ESI, will focus primarily on healthcare real estate but will also invest in educational facilities and affordable housing.
'Healthcare real estate, educational facilities and housing, are all resilient asset classes in which we have built up renowned expertise over the years,’ said Laurent Fléchet, deputy managing director responsible for the Primonial Group’s real estate activities. ‘I am delighted to be able to offer our institutional investors today such an innovative investment solution that will bring in opportunities and create value for the future. This launch is testament to Primonial’s capacity to generate synergies between the Group’s various real estate entities and offer our clients a comprehensive solution on the back of our robust and integrated European network.’
Primonial, which currently manages over €8 bn of healthcare real estate, is a strong believer in the healthcare property sector, as the sector is driven by long-term megatrends such as an ageing population boosting demand for retirement homes and medical care. ‘The Covid-19 crisis has emphasised the shortage of social infrastructure in European countries, and many governments have already announced that healthcare and social infrastructure will be major components of their future economic stimulus plans,’ the company said.
ESI currently owns a portfolio of 23 healthcare real estate assets in Germany and Austria with a value of €293 mln. The fund is also in the process of buying over €140 mln of assets across two healthcare real estate portfolio deals in France and the Netherlands, expected to close by September 2020.
The fund, which will be managed and marketed by Primonial Luxembourg with local back-up from the Group’s various real estate asset management companies, aims to achieve about €1 bn of assets under management by 2022. It is aiming for a target annual payout rate of 5%.
Stéphanie Lacroix, Chief Executive Officer of Primonial REIM added: ‘The economic climate is such that investors are looking for steady returns and controlled volatility; ESI meets these expectations with investments combining financial and social value-added.’
The ESI fund will invest across Europe in regions with solid fundamentals and will be overweight in Northern European countries (Germany, Austria, Netherlands, France, etc.) which will account for 80% of its target allocation. It will be 80%-invested in healthcare real estate and accommodation for senior citizens, 15% in educational facilities and 5% in affordable housing.
The healthcare investments will secure recurring income thanks to long-term leases signed with top-tier healthcare firms (operating nationally or Europewide), while the education and housing compartment will potentially offer capital growth by selecting locations with attractive fundamentals in terms of demographic trends, rental demand and prices or rents,’ Primonial said in a statement.
The fund – which had been in the works since early last year – is the second pan European vehicle launched by the French group following the creation of a pan-European fund focused on residential in late 2018.
Primonial – traditionally more of an office specialist – has been expanding aggressively in the healthcare and residential property segments, with assets for these two segments valued at €10 bn.
