France, and Paris in particular, will be a major focus of our new core+ vehicle Canadian investment manager Brookfield Asset Management recently announced the closing of its first European core+ real estate fund, Brookfield European Real Estate Partnership (BEREP), with total equity commitments of 1.14bn, exceeding the original 1bn fundraising target. Zachary Vaughan, Head of European Real Estate, detailed for Business Immo the firm s investment strategy for the new vehicle and the role France will play in it.
Business Immo: Brookfield recently announced the first closing of its first European core+ real estate fund, Brookfield European Real Estate Partnership (BEREP). How did this new strategy come to be?
Zachary Vaughan: In the last five years, Brookfield has made a significant effort to grow business across Europe and the United Kingdom. In the real estate sector, we started by investing through an opportunistic strategy, mainly on the office development and the living sectors. However, although people in Europe may know us better for our opportunistic strategies, we have primarily been a long-term investor since we started our property business 35 years ago, starting with office properties in the major Canadian markets, and about three quarters of the capital that we invest in real estate is through core+ strategies. This approach is therefore in our DNA. We created this particular vehicle because we see opportunities on the market and feel like we have an advantage. Given the scale of our global business, our tenant rela- tionships and the number of assets we ope- rate, we can come in and underwrite assets that have some sort of transitional elements to them and that core investors wouldn t typically consider.
BI: What will be your investment strategy for BEREP?
ZV: Our new vehicle is designed to be an open-ended perpetual core+ fund. To that end, we will be targeting high-quality assets that show a lower near-term risk but offer opportunities to improve their cashflow over time, either by executing light capex programs or regearing leases. We are looking
for assets located in tremendous locations that we know will be on a path for growth in the future. The vehicle is designed to invest across all sectors, except hospitality, and will generally be focused on what we feel are Europe s five biggest markets, France, Germany, Spain, the Netherlands and the United Kingdom, although it could also look at the Nordics and Italy for opportunities. Within those geographies, the major cities will be our primary targets. This portfolio should therefore regroup a very diversi- fied pool of assets, both by region and by sector. Also, we are not limited in terms of ticket size, even though the fund itself has concentration limits. We will usually look for investments starting at around 50m of equity, but for very large opportunities, we can also bring in outside investors alongside. Because this vehicle was always designed to be a lower-risk longer-term strategy, we have limited its leverage to 50%.
BI: The fund s first investment was the acquisition of Paris 10th s 42-44 rue du Paradis, a 6,500 sqm office building PGIM investing over 50 million of equity. What role will France play in the vehicle s strategy going forward?
ZV: We are very active in France, probably much more than people know. We have
around $14bn AUM on this market across our businesses, whether it s property, infrastructure, renewable power, private equity and credit, and about $2bn of real estate assets, which has been substantially invested over the past 24 months. France, and Paris in particular, will be a major focus of this vehicle given the scale and the liquidity of the market. The rue de Paradis acquisition is a good example of the type of assets we will target with this core+ strategy : quality assets located in central locations, next to metro stations, with lots of upside coming both from the micro-location and the tenant mix. In addition to offices in Paris, which is a very liquid and deep market with high growth potential, we will also be primarily interested in logistics and student housing, for which opportunities could be also be found in secondary cities.
BI: What will be your investment schedule for this fund?
ZV: After launching the fund earlier this year, we had a first closing at 1.14bn and, after we invest the initial capital, hopefully over the next 18 months, it will become a perpetual vehicle for which we will continue to raise capital. It will probably be logistically challen- ging to execute transactions until at least next spring, when travel could normalise.
We are looking for assets located in tremendous locations that we know will be on a path for growth in the future
Zachary Vaughan, Brookfield Asset
Management
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By Luc-Etienne Rouillard Lafond
86 | Magazine Business Immo #171 Décembre 2020
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