BC Partners Real Estate has closed its debut European value-added fund, raising €900 million after initially targeting between €500 million and €700 million, PERE has exclusively learned.
The London-based private equity firm initially entered the market with BC Partners European Real Estate I in Q2 2019, managing to raise the majority of its capital by January 2020, before the pandemic brought the capital markets to a standstill. The initial €700 million to €750 million raise was completed this year after a final large French investor closed its commitment, according to Stéphane Theuriau, partner and head of BCP RE. PERE understands the firm also snagged commitments from three of the four largest global investors, the sole holdout being Allianz Real Estate.
“In between January 2020 until September, we felt the markets were absolutely frozen,” Theuriau said. “It took a bit more time creating those new relationships when you can’t meet people.”
Indeed, 90 percent of the capital in the fund came from BC Partners’ and Theuriau’s existing relationships in Europe. No capital came from the US, where investors and the consultants that advise on investments typically avoid committing to first-time funds. “It’s easier for them to advise limited partners to re-up on existing relationships,” Theuriau said. Investors in the fund consist primarily of European pension funds, sovereign wealth funds and French life insurance companies.
The size of the fund allows the firm to enact its pan-European strategy, something Theuriau wanted to focus on when moving to BCP RE from his prior role at Altarea Cogedim. He brought over his two lieutenants, Laurian Douin and Thibault Laupretre, with him to form this new venture in 2018.
“We were targeting between €500 million to €700 million, which is in line with what we had seen other first-time funds raise,” Theuriau said. “€700 million would have been a great result, but some of our LPs signed bigger tickets that they initially agreed to, pushing us beyond this threshold.”
The initial LPs were happy waiting for more favorable deployment dynamics. BCPERE I is around 40 percent deployed and is targeting the office, residential and industrial sectors.
For both industrial and residential, BCP RE is keenly looking at development opportunities and has investments in existing high-growth platforms in France and Germany. “If we find a development platform that would enable us to access assets upstream, it makes us more comfortable,” Theuriau said.
Meanwhile, the firm is focusing on repositioning plays alongside the development angle in the office sector. Pre-covid, Theuriau was pitching investors on the notion of digital mobility changing the way buildings are designed, arguing that less of a cycle redesign and more of a 30-year transition was necessary. That was predicated on personal technology allowing employees to work in areas other than the office. At the same time, tenant demand increased for office buildings that provide more outdoor space, less density and cleaner and more efficient air systems.
“We were seeing ourselves being rewarded for better-designed and more ambitious buildings,” Theuriau said. “We leased assets at higher prices more quickly and sold at better cap rates.”
BCP RE has closed the fund at a time when repositioning office assets both from an obsolescence and decarbonization point of view is poised to become a major theme for this year. Many real estate assets are in good locations but require significant work to meet current tenant demands. Many owners will be unlikely to want to undertake such risky and ambitious business plans on existing stock, creating a pipeline that will align with BCP RE’s next 12-18 months of planned deployment.
“We like distressed ownership situations,” Theuriau said. “I don’t like distressed assets.”