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Pictet offers European real estate fund

Fund will focus on mid-sized segment of real estate market, targeting investments in gateway cities in western Europe


David Robinson

Pictet Alternative Advisors, the Pictet Group’s alternative investment company, is adding to its alternative strategies with the launch of a direct real estate fund for professional investors.

The new strategy will be managed by a 14-person team led by Zsolt Kohalmi, who joins Pictet from Starwood Capital, where he was head of acquisitions in Europe.

The fund will invest in European real estate assets and related companies across sectors such as offices, residential assets, student and senior accommodation as well as light industrial assets. Its focus will be on the mid-sized segment of the real estate market, targeting investments in smart gateway cities in western Europe.

The fund is reinforced by local real estate country heads in six offices across Europe (UK, Germany, Sweden, Spain, Luxembourg and Switzerland).

“Europe, on a risk adjusted basis, remains a compelling investment opportunity in real estate. Asia has record low cap rates, translating to record high capital values, and the US is far along in the cycle, and has a higher interest rate environment that may eventually lead to cap rate expansion.

“Meanwhile, 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 said.

“Volatility in certain European markets over the coming years, for example in the UK due to Brexit, will lead to a variety of entry point opportunities, hence the importance of a local presence in our six offices to get the ‘first call’ for transactions.”

Demand increase

The underlying fundamentals also look interesting,  Kohalmi said.

“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.

“Due to the lack of banks’ willingness to lend, Europe has seen significantly below long-term average refurbishment and development of new real estate stock over the last 10 years. As occupiers needs and desires evolve, technology and the request for more environmentally friendly buildings is also increasingly influencing demand, this creates a real opportunity to create stock that is currently in short supply.”

He added: “Demographic trends are critical too. Millennials demand single households and prefer to rent rather than buy.”

“Then there’s the growing need for specialised housing for Europe’s ageing population and demand from inbound international students at the other end,” he added.