Primonial Group, a leading European real estate asset manager with over €26 billion of assets under management, has launched ESI, a pan-European open-ended real estate fund dedicated to social infrastructure and covering healthcare real estate primarily but also educational facilities and affordable housing.
ESI aims to achieve about €1 billion of assets under management by 2022; its purpose is to participate in a collective effort in favour of healthcare operators and help to meet the future funding requirements of Europe’s social infrastructure sector.
ESI already has around €450 million invested – or in the process of being invested – in healthcare assets (clinics, retirement homes, etc.).
As a leading European asset manager in the healthcare and education real estate industry with over €8 billion of assets under management, along with around €2 billion of residential assets under management, Primonial Group is fully familiar with these sectors and their dynamics. The Group has a foothold in several European countries, so it is able to address each real estate market with a local approach and local expertise and enjoys preferential access to investment opportunities.
I/ ESI: A NEW PAN-EUROPEAN INSTITUTIONAL FUND DEDICATED TO SOCIAL INFRASTRUCTURE
The ESI fund is a SICAV (open-ended investment fund) managed and marketed by Primonial Luxembourg with local back-up from the Group’s various real estate asset management companies, primarily Primonial REIM in France and AviaRent in Germany handling the real estate asset sourcing and equity raising aspects.
ESI caters to both local and international institutional investors looking to receive recurring income and grow their invested capital over the long term.
The fund is aiming for a target annual payout rate of 5%.
Its strategy consists in investing exclusively in social infrastructure and targeting quality assets in the following fields:
- healthcare and accommodation for senior citizens (clinics, medical centres, nursing homes, assisted-living facilities, etc.),
- education (schools, training centres, nurseries, etc.),
- affordable housing or accommodation reserved for specific categories (intermediate/social housing, student accommodation, etc.).
The ESI fund will invest across Europe in regions with solid fundamentals and be overweight in Northern European countries which will account for 80% of its target allocation (euro zone countries: Germany, Austria, Netherlands, France, etc.). It will invest in the following types of assets: 80% in healthcare real estate and accommodation for senior citizens, 15% in educational facilities and 5% in affordable housing.
The healthcare compartment 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.
II/ HIGH-IMPACT SOCIAL INVESTMENTS IN BUOYANT MARKETS
The ESI fund’s investment strategy is based on Primonial’s strongest market convictions, both macroeconomic and microeconomic.
The need for social infrastructure across Europe is driven by long-term megatrends: an ageing population boosting demand for retirement homes and medical care, social mobility, and access to housing in areas with insufficient supply, etc.
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.
In 2018, the European Commission’s “Boosting Investment in Social Infrastructure in Europe” report had estimated the investment deficit in social infrastructure at €142 billion, spread out as follows: €15 billion in education, €70 billion in healthcare accommodation and €57 billion in affordable housing.
ESI is a real estate fund dedicated to social infrastructure. It offers institutional investors an opportunity to support socially beneficial sectors, which are non-cyclical by nature, and thus help to meet the population’s growing need for such infrastructure by participating in the development of private facilities to complement public facilities.
III/ MOMENTUM ALREADY UNDERWAY AND MAJOR INVESTMENTS IN THE PIPELINE
The fund’s portfolio already consists of 23 healthcare real estate assets in Germany and Austria with a value of €293 million.
A pipeline worth over €140 million and corresponding to two healthcare real estate portfolios in France and the Netherlands has already been identified. These investments should be finalised by September 2020.
This new fund reflects Primonial Group’s drive to develop its healthcare/education and residential real estate activities across Europe and its determination to offer its institutional clients an opportunity to invest in real estate portfolios combining financial performance and ESG criteria.
Source : Primonial