Photographer: Jean-Marie Heidinger
Guillaume Poitrinal has just been asked, half-tongue in cheek, if a parallel could be made between his real estate firm and the electric car giant Tesla. “You can write that,” he responds, more than half-seriously. “I’ve never said it to a journalist. But, when you step back, there are a number of similarities. You will realize it.”
Listening to him, it is easy to forget Poitrinal was once chief executive officer of a CAC 40-listed company, with all the strict disclosure and reporting rules that entails. He exudes a freewheeling energy arguably better suited to private markets. He talks like an entrepreneur who thinks he is on the cusp of disrupting a market. While comparing him to Elon Musk, Tesla’s founder and the world’s richest man, might be a stretch, there is something there. “But I don’t want to go to the moon,” he jokes.
Poitrinal switched from running listed powerhouse Unibail-Rodamco to boutique private equity real estate firm ICAMAP less than a decade ago. In that time, he has become a crusader for cross-laminated timber construction. With this management business and its various affiliates, he believes he has a market-defining product on his hands. Crucially, a small but growing following of influential institutional investors has bought into the vision, and these include German insurer Allianz Real Estate, Ivanhoé Cambridge, the real estate business of Canadian pension Caisse de dépôt et placement du Québec and the French investors Natixis Assurances, Caisse de dépôt et Consignation and the family office of car giant Peugeot.
They are among 28 investors that have committed an aggregate €1.7 billion to ICAMAP since its inception in 2013, including €750 million for ICAWOOD, the closed-end, Paris office development fund dedicated to his firm’s signature wood-based constructions. It is quite the equity haul for a business yet to register a single exit.
Poitrinal is not waiting for one either. With ICAWOOD 1 already 70 percent deployed, he reveals to PERE plans for a successor fund, this time with a pan-European and pan-asset class remit, and a bigger capital raising target of €1 billion to boot. “We want to continue to make products in the Paris region. But also now the Netherlands, Belgium, Luxembourg, Germany and England,” says Poitrinal. “We are looking at some large projects and believe there is market sensitivity for these.”
The ‘post covid’ office
Prospective investors will be shown Arboretum, an approximately 1.35 million-square-foot office campus in the Greater La Défense business hub of Paris. When it completes early next year, it is expected to be the biggest wooden office construction worldwide. It epitomizes Poitrinal’s vision for a commercial real estate development sector able to help bring about carbon neutrality by 2050.
Dubbed the ‘post-covid’ office, it has been designed to cater to between 8,000 and 10,000 workers across indoor and outdoor workspaces, each of whom are expected to enjoy greater and more open space than is typically available elsewhere. Ceiling heights will top three meters and there will be notably more staircases to encourage more exercise. There will be greenery on every corner too. “On top of the low carbon is the social role,” says Poitrinal. “We are providing offices that answer what users want in terms of volume, daylight, vegetation and green areas – inside and out.”
A focus for niches
ICAMAP was founded by Poitrinal, former JPMorgan analyst Harm Meijer and ex-Boussard & Gavaudan fund manager Alexandre Aquien in 2013.
Poitrinal says its purpose is to “focus on niches where other managers are not spending time. Today we focus on two: wooden and listed property.” In the nine years since its inception, ICAMAP has raised €1.7 billion of equity, including co-investments, for these strategies from 28 institutional investors spanning all three major regions. It currently manages three funds with a fourth soon to be introduced.
Given its environmentally friendly design, the embodied and operational carbon emissions of the development will be significantly low. For instance, eight times fewer trucks are required for its construction. Wood is also five times lighter than concrete: “We can cross rail and retail parks,” Poitrinal says. “That means far easier access to the land than if we needed traditional building materials.”
The wood sourced by WO2, Arboretum’s developer – one of the affiliates co-owned by Poitrinal – comes exclusively from one Finnish-Swedish partner with factories in Austria. It is arranged via a long-standing and recurring agreement subject to renewal every three years. Meanwhile, operationally, Arboretum will be heated, and its electricity generated, by a geothermal pump and 11 boreholes on site.
“For tenants, there is a clear traction for products like this. They are all willing to reduce their carbon footprint and know an HQ can be a nice way to communicate what is being done about it,” says Poitrinal.
Of course, the proof of the pudding is in the eating and the leasing effort for Arboretum has just started. Furthermore, ICAMAP is leasing into a Paris office market still recovering from the impact of covid-19 on occupier demand, notable new development and vacancy. According to broker Colliers’ Offices Greater Paris Region Q1 2022 report, while the 602,000 square feet leased in La Défense represented one third of all Paris take-up in the quarter, city-wide leasing was still 11 percent down on pre-covid levels. In addition, vacant space in the city grew by 1 percent quarter-on-quarter to more than 43 million square feet.
Within that volume, new vacant space grew by 5 percent. These are not ideal conditions for a developer about to top out.
Despite that, ICAMAP has proved its concept by agreeing a notable pre-let with gas infrastructure company Gaz Reseau Distribution France for 269,000 square feet at another of its office developments in the Saint-Denis area of Paris – two years before its scheduled completion. Poitrinal would not confirm the agreed rent, though it is understood to be between €300 and €350 per square foot. He says it is a market rate. But he believes the letting demonstrates the pull factor of cross-laminated timber development amid plentiful alternative options. “We were in a competitive process with 10 other buildings and we did not win on price in a zone which is oversupplied.”
A nice IRR
“There was no premium, but it will come,” he says. “In the meantime, it will offer a nice IRR and multiple for investors.”
That should please ICAWOOD’s investors, which are currently more interested in take-up at the fund’s assets than any exits. Karim Habra, head of Europe and co-head of Asia-Pacific at Ivanhoé Cambridge, says: “There is time for them to demonstrate an exit. More important is the leasing status of the buildings. That is the comfort I’m looking for.”
Ivanhoé Cambridge is the cornerstone investor of the fund. “We were convinced Paris had a need for better buildings,” Habra says. “We like the development risk here as these are the right partners and the right locations. Obviously, we like the low carbon strategy and believe in cross-laminated timber too. This was an opportunity for us to be present in the market with this type of technology.”
Furthermore, he believes ICAMAP’s plans to take the ICAWOOD strategy pan-European makes sense: “We believe the European market lacks this product so there is an opportunity to expand. Of course, it depends on the team they build across Europe and the culture they can set. But we really like the opportunity.”
So Ivanhoé Cambridge will assess a commitment to ICAWOOD 2. Allianz Real Estate will also. Chief executive officer and chief investment officer Francois Trausch has already overseen a €150 million fund commitment and €200 million of the €432 million of development debt raised for Arboretum. “We’ve made a fairly big bet,” he says.
But given Allianz’s own growing appetite for assets meeting the popular Carbon Risk Real Estate Monitor requirements, size was important for the insurer. Allianz has experience investing in wood-based developments in Switzerland but not elsewhere. Trausch wanted to address that. “I said to them I would back this if they show me a pipeline,” he says. “They needed to go big or go home. They delivered.” Indeed, besides Arboretum, ICAWOOD’s portfolio includes another six other projects.
“There is one issue above all the others: global warming. For us, it is about carbon emissions”
It is this pipeline execution that has meant the fund could attract sizable capital. Indeed, Allianz’s loan is among €1.2 billion of financing arranged for the portfolio so far and, when totally deployed, the fund could have assets under management approaching €2 billion in value. On exits, Trausch echoes Habra: “I’m not too concerned. The entry points have been good.” And like Habra, he too feels leasing activity, especially at Arboretum, is currently the more important measure, though he says: “It won’t be easy in the current environment.”
The fund has a net IRR target of 12 to 15 percent net, typical for a value-add strategy though lower than many other development-orientated strategies, indicating a green premium investors will need to reconcile. But if ICAMAP can lease the properties at underwriting, that will both validate ICAWOOD’s strategy and prove that sustainable investing can yield institutional returns.
Furthermore, Poitrinal says his firm’s developments should command a green premium in due course such is the growing demand for assets that demonstrate investors’ own sustainability targets. “Brokers tell us they believe our assets deserve premium cap rates – 4 percent versus 4.5 percent – because investors need to demonstrate low carbon.”
One issue above all others
Predictably, Poitrinal has a lot to say about demonstrating low carbon. He thinks the concept has been overcomplicated by a multitude of assessments, measures and certifications scattered about the industry. ICAMAP prioritizes an undistracted focus on sustainability. The firm signed up to a pan-European low carbon label which was announced in March at MIPIM, the European property conference, and is aimed at assessing emissions from buildings through their life cycle. Other signatures include Italian insurer Generali Real Estate and ICAWOOD’s backer Ivanhoé Cambridge.
At the heart of this certification – and chiming with Poitrinal’s sustainability focus – is decarbonization. He says: “There is one issue above all the others: global warming. For us, it is about carbon emissions. When you look at BREEAM or LEED you have 200 criteria. Just three or four deal with global warming. If the world gets to plus-five degrees, none of that matters. Above all of that stuff is a concern for CO2 and we need to reduce it asap.”
For Poitrinal, only one metric matters: “It’s kilogram of CO2 per square meter over the life cycle of the building.” He says this measure should be applicable internationally. “There’s no reason why it should be different from one country to another.”
“We are providing offices that answer what users want in terms of volume, daylight, vegetation and green areas – inside and out”
In that vein, he is not looking to patent ICAWOOD’s approach to development. In fact, Poitrinal acknowledges the firm’s techniques using cross-laminated timber are not unique and welcomes competitors doing likewise. If they do, this further proves the concept. This is important in weaning an industry, which has been historically hooked on carbon-heavy materials like concrete – “that accounts for 10 to 15 percent of total global emissions,” he says.
But, just as Tesla stands out in an increasingly populated electric car market, he is sure the quality of ICAWOOD’s work will set it apart regardless of others joining its vision made of wood. “Tesla cars cost like hell to make and yet their prices are incredible. It’s not just about their engineering performance. It’s also about the feeling. The look and feel of a Tesla is different.”
Pointing to an image of Arboretum, he says, more than half-seriously: “That’s what we’re trying to do here with the visibility of wood. This is just a different place to work.”
CLT ascends from low base
ICAWOOD is not the only institutional-level manager to adopt wholesale the use of cross-laminated timber for its developments.
In June 2021, Australian manager Cromwell Property Group launched a fund dedicated to similar wood-based commercial developments in Europe for which it is aiming to raise €1 billion. Indeed, Europe is currently the epicenter for CLT-based strategies where the use of these wood panels made from solid-sawn lumber and glued together to form single logs has been growing steadily, albeit from a low base.
According to a report from data provider Research & Markets, the CLT market was worth approximately $1.1 billion last year, but is projected to grow at a compound annual growth rate of 14 percent, increasing to about $2.5 billion by 2027.
ICAWOOD and other early institutional adopters are expected to reap fast carbon reduction benefits. According to a report by the Multidisciplinary Digital Publishing Institute, a publisher of open access scientific journals, a typical seven-story building uses 29.4 percent less energy than a concrete equivalent, equalling 24.6 percent less carbon emissions.
‘Guillaume was the perfect candidate’
Poitrinal is one of France’s highest regarded – and decorated – businessmen
Among Poitrinal’s many awards is a knighthood in the country’s top Légion d’honneur accolade, bestowed on him in 2015, and a medal from France’s Academy of Architecture in 2012.
He has also won many property industry awards from his time as chief executive officer of Unibail-Rodamco. He was appointed into that role by predecessor and industry great Léon Bressler who remains proud of his succession’s choice.
“Guillaume was the perfect candidate to be CEO,” Bressler recalls. “He was intelligent, energetic and action-driven and had a veritable combination of great analytic skills and insight. There was an ability to have a global, strategic view and pay attention to detail.”
When Bressler handed over the reins to Unibail-Rodamco in 2005, he switched to private real estate and today runs Aermont Capital, known for its eclectic opportunistic investment style. He is unsurprised Poitrinal has also made a similar switch and has also targeted niches.
“Guillaume is a very bright person who has also chosen a very entrepreneurial activity. I think it was a fantastic move,” he says.
He is also unsurprised to see ICAMAP’s wood-based development strategy gain traction with investors: “The reasons are obvious. They are backing a quality entrepreneur and there is a sensitivity to ESG that has been building for many years.”
The other niche
Running parallel to ICAWOOD is ICAMAP’s other niche: listed real estate securities
Through an open-end fund called ICAMAX, the firm invests in companies that sit outside of the sector’s major benchmarks. The vehicle represents something of a refined option following the firm’s initial ICAMAP vehicle, which was invested in both listed and private positions.
The fund has an investable universe of about 500 European companies with a total market capitalization of €584 billion. Within those aggregates, about 70 percent can be classified large cap. ICAMAX’s interests are outside of this.
“There’s a whole listed universe that is overlooked, under-researched and undervalued but has quality buildings,” says Meijer, who runs the fund. The vehicle has attracted €220 million so far and early investors have been rewarded with outperformance: 16.7 percent last year versus 3.8 percent for the EPRA index over the same period in 2021.
The current stock market malaise has impacted performance – as it has across the listed universe. But the relative lower trading volumes combined with what Meijer describes as ICAMAX’s “knowledge, research, models” has kept the fund outperforming peers: “This year, we are -2 percent while most indices are -5 to -20 percent.”
ICAMAP has been a lucky stock picker too. One of its notable investments, Atrium Real Estate, carried a meaningful Russia exposure, for example. Meijer says it exited the stock just two days before Russia invaded Ukraine. “Ten percent of its value and 20 percent of its rental income was from Russia,” Meijer explains.
Fortunate episodes aside, over the long run, Meijer says the strategy should gain momentum with institutional investors keen for a greater liquid component to their property holdings and for those keen to adjust their exposure to sustainable assets faster. ICAMAX employs solely to research and build an ESG database to inform its outlays.
“Last year, we only invested in companies which we felt were prepared or for which the cost [to upgrade assets] will not be too high.”