Allianz: Staying the course in uncertain times

Allianz Real Estate CEO François Trausch reflects on a year in which the triple-award winner defied the pandemic to expand its third-party business.

This article is sponsored by Allianz Real Estate

What were the key events for your firm last year?

Francois Trausch

Two key events were the transfer of the shares of Allianz Real Estate to another part of the Allianz group – fixed-income investment manager PIMCO and the establishment of our third-party business which we announced in October 2018. Within our new structure, Allianz Real Estate retains the Allianz mandate to invest in real estate, and on top of that we have become part of a huge US-based manager that is already active in many different asset classes.

PIMCO’s business is complementary to ours because while Allianz Real Estate has mainly invested in core, core-plus and value-add assets, PIMCO’s team specializes more in special situations and opportunistic investments. The merger will also assist our ambition to do more third-party fund management, because it provides us with the expertise of PIMCO’s distribution network.

However, even before that we had already begun to expand our third-party business through an LP-to-LP approach. In May, German pension fund Bayerische Versorgungskammer (BVK) became the first third-party investor to join our Luxembourg-regulated PAREC debt fund, and in June we formed a $2.3 billion Asian core real estate investment platform with the National Pension Service of Korea.

How has the operating environment been?

It was another year in which we had to deploy capital, and we invested and lent €8.3 billion, so in that sense it was business as usual. But we have never seen a business environment like this.

Together with Allianz, we took the view that we would stay the course and continue to invest. That sounds like an easy decision, but in March we did not know whether it would be like 2008, when things completely fell apart.

How did you overcome the key challenges you faced?

We persevered with the deals originated in 2019, sometimes with some price adjustments, and then continued to invest thereafter. Having a portfolio that was diversified across different regions helped.

Asia was a little faster out of the gate than Europe, and the megatrends that underpin that market are still valid. It is not a coincidence that 31 percent of our investments last year were in Asia.

We had already started to ramp up our logistics activity, and it was not a difficult decision to continue to invest in that sector. Time will tell whether our 2020-vintage office acquisitions will be successful. But we concentrated on city center assets close to transport nodes, which we feel will catch the better part of future demand, even if there is more working from home.

Who or what is mainly responsible for your success?

As an investor, Allianz showed confidence in us as a manager to address the questions covid posed for the existing investment program, while still giving us new money to invest. Diversification really paid off in 2020. If we had only invested in Europe and in offices, we wouldn’t have done as well as we did by also investing in Asia, and in logistics.

Finally, companies like us that invested in the managerial aspects of building a single, close team, and in building teams that spent a lot of time to get to know each other, found that paid off during the pandemic as they were able to work more effectively together in spite of physical distancing.