HOUSING FIRST – BACK TO BASICS

High-rise

hopes As Europe’s biggest residential landlords race to expand, their greatest challenges include finding institutional grade assets — and figuring out the social aspect. Isobel Lee reports

The residential investment scene witnessed major moves in 2021. In Europe, the two largest deals ever recorded in the sector created significant consolidation and underlined the huge appetite for the asset class. German listed giants Vonovia and Deutsche Wohnen finally concluded their long dance to create the largest housing group in Europe, with 500,000 apartments worth almost €90bn in three countries, and a market capitalisation of around €45bn. Meanwhile, in the private space, Nordic specialist Heimstaden Bostad acquired the entire Scandinavian and German portfolio of Akelius Residential Property for €9.1bn, to underline its pre-eminence in the sector. These megadeals — and plenty of other activity — ensured that total volumes in Europe reached a record peak in Q3 2021, overtaking offices as the biggest investment market. “In the past, investors never wanted to get involved with residential deals,” says Marc Bertrand, CEO of Amundi Immobilier. “It was seen as a complicated B2C business, expensive to manage. But investors have rediscovered that this asset class provides steady income, and is highly resilient. In a very depressed yield environment, it is no longer a significant sacrifice to have a 2-3% net cash yield.” Amundi Immobilier, traditionally an office-focused investor, has expanded its horizons to include

Experienced residential investor Patrizia recently acquired a state-of-the-art apartment tower in Helsinki, Finland

residential properties in recent times. Bertrand explains that in a climate of slowing fundraising for the group, the firm is now seeking to diversify into properties ranging from logistics assets to “beds”, including apartments, health care, student housing and more. “The main problem we have ahead is the acute scarcity of institutional-grade residential. Investors are looking for new and prime blocks which represent a tiny segment of the market, just 5-10%,” Bertrand says. “The bulk of the market is made up of individual properties with wide geographical. In fact, we believe there is a market opportunity to offer institutional investors a service to address this.” Investment manager Redevco is another recent entrant with an interest in solving some of the sector’s challenges. “It is our mission to help cities become more sustainable and liveable,” says chief strategy & innovation officer Marrit Laning, citing the fact that some 70 million people are projected to move to major European cities over the next 30 years. “Our current focus lies in the Netherlands, the UK, Germany and Spain. We recently acquired an outdated shopping centre in Oxford called Templars Square and are planning to redevelop and create a mixeduse location including affordable rental units.” Another project, in Amstelveen, will feature sharing services including garden, bikes, e-scooters and co-living. “In many countries there is an acute shortage of housing, especially in the mid and lower rental level. We would like to step into that void and create housing that is both affordable, sustainable and addresses the needs of the target audience.” Allianz Real Estate is currently making tracks with a successful residential strategy encompassing everything from market rent properties to social housing. At the end of last year the firm announced it had inked a joint venture with Heimstaden Bostad to access part of its Akelius deal, investing SEK 7.9bn (€770m) of equity to buy a 56.25% capital

share and a 49.85% voting share in a 99-asset Swedish portfolio with a gross asset value of €3bn. Annette Kröger, CEO North & Central Europe for Allianz Real Estate, says: “Multifamily is one of the most prominent, institutional, stable asset classes and benefits from long-term trends — including a growing young population, a lack of affordable housing, and urbanisation — bolstering demand. With €9bn under management, Allianz has managed residential assets for decades, particularly in the US and Europe, and more recently in APAC where we have closed significant deals in Japan.” She adds: “The residential sector is heavily influenced by local nuances, but global trends around urbanisation and lifestyle changes affect all regions and are creating new opportunities. We see an active role for institutional investors who are positioned to finance the large developments that are needed and manage at scale.” Mahdi Mokrane, head of investment strategy & research at Patrizia says: “The pandemic has not changed the general demand-supply imbalance in Europe. Urbanisation will continue to drive the market in the major cities.” A major player in the sector, Patrizia’s interest in residential “continues unabated” according to Mokrane. “We’ve been active despite COVID with almost €4.0bn of transaction activity. Active in Germany, Nordics, Ireland and the Netherlands and more recently in the UK and Spain.” Another investor which has decided to boost its residential credentials in recent times is real estate investment manager Garbe Institutional Capital. In December, the firm launched a €800m pan-European residential real estate fund focusing on the UK, Netherlands, France and key CEE capitals. Managing director Thomas Kallenbrunnen says: “Garbe started out in the 1960s as a residential investor, but has redoubled interest in recent years. We want to shift our non-logistics component away from being a trading developer to being an investor developer.” Garbe is also interested in affordable residential, although Kallenbrunnen warns: “Regulation often means that you can’t put up rents to pay for the necessary refurbishments.” Kröger adds: “Regarding social housing, the under-supply coupled with stronger regulation within the segment provides for even higher cash flow stability and resilience, aligning well with our approach as long-term investors. Investing in affordable housing has a social responsibility element, we can help cities meet demand.”

Marc Betrand, CEO of Amundi Immobilier

“In many countries there is an acute shortage of housing… we would like to step into that void and create housing that is both affordable, sustainable and addresses the needs of the target audience”

Marrit Laning Annette Kröger,

CEO North & Central Europe for Allianz Real Estate

CONFERENCES & EVENTS AT MIPIM 2022 HOUSING FIRST: BACK TO BASICS

WEDNESDAY, MARCH 16, 15.45 - 16.30 – Agora Room

HOUSING FIRST: THE AFFORDABLE CHALLENGE

Investor appetite for residential assets is on the rise. Is housing a safe-haven asset? Experts explore the future of the asset class, and the challenge of supplying affordable units.