Lukas Job 24th September 2020, 5:36 pm
Catella Residential Investment Management is seeing strong demand for its latest pan-European investment fund from new and existing institutional clients, managing director Michael Fink told REFI Europe.
Catella European Residential III - which counts French insurer Primonial amongst its investors - has received close to €200m in new commitments over the past four months alone. Interest for its German vehicles is similar, and many existing clients are enquiring for top-ups.
'We are currently talking to clients across Europe, from Germany, France, the Netherlands, Switzerland, the UK, even Finland and Norway. Everyone is facing the same issue; riskless alternatives give zero or negative returns,' Fink said.
Interest for Catella's funds is coming from across the board. The company recently received a €100m commitment from a major corporate Dutch pension fund, another from a German insurance company, and top-ups from several German pension funds.
Fink believes the pan-European nature of CER III is helping to drive the demand as more European institutional investors see the benefits of diversification. 'We saw 50 international clients in the past 12 months, and almost every client, if it's a French, Dutch or German client, they have residential investments, but only in their own country. Often 90% of their allocation is targeted to only one country, usually where they're based,' he said.
This interest means that Catella is in the early stages of discussing potential new vehicles, although nothing concrete has been decided. It is highly likely that the company will have launched new funds by mid-2021, Fink added.
In response to the growing interest, the company has named Simon Günkel as a new executive director for its Berlin office. He will be responsible for institutional clients, including insurance companies and pension funds.
Fink has a neutral to positive outlook for this year and next. He noted, however, that there are a lot of circumstances surrounding it that aren't particularly positive. Especially over the next 12 months, Fink thinks that the market will be bumpy. Although cashflow should
largely remain stable thanks to government schemes such as Kurzarbeit in Germany or the furlough scheme in the UK, there will be higher unemployment rates, so investors should remain patient and conservative in their decision-making.
Fink also cautioned care when making new investments. Catella Residential, for example, avoids bidding processes because the company believes this can drive up prices unnecessarily. Bigger picture, Fink sees a lot of potential in pan-European senior housing, and also thinks that some attractive opportunities for office-conversions might soon start appearing on the horizon.
Following the Covid-19 pandemic, Catella Residential has become more careful in its investments, and now focuses even more on core markets than before. It tries only to buy below mid-market rental levels, which it achieves for 80-90% of its investments. For
Fink, the big advantage of mid-market rents is that affordable assets deliver more stable cash-flow. He also sees an important social component in expanding the offering of affordable housing.
The company has also become more conservative in the positioning of serviced apartments and business apartments because, if no one is travelling, it is impossible to rent units out for four to six weeks for travellers.
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