TransEuropean, Europe’s oldest private equity real estate fund series, has reached an important juncture following the departures of the senior executives that led it to success in the years after the global financial crisis.
Senior managing director and head of international fund management Paul Hampton and managing director Charles-Nicolas Tarriére left the series’ manager, Augsburg-based Patrizia, earlier this month. They were designated key men for the funds, which are now onto an eighth iteration, TransEuropean VIII.
The fund was launched in the spring with an aim of attracting more than the €750 million raised for TransEuropean VII in 2020, three decades after the series’ inception in 1992. A first closing for the latest vehicle is yet to be announced.
The departures will test the resolve of investors to keep faith with a series which, so far, has generated realized IRRs of approximately 20 percent and equity multiples of between 1.6x and 1.8x since TransEuropean IV, which closed around the time of the global financial crisis in 2008. The fourth fund is widely considered the start of the series’ institutionally relevant offerings, as the prior vehicles were smaller.
Hampton and Tarriére are credited for their leadership of the series during this period, prompting questions about its future following their exit. The firm has since replaced them as key people with Michael Pryer, who has also been appointed as its next head of international fund management and the series’ chairman, and director Christie Baird who has been appointed its fund manager.
Like Hampton and Tarriére, Pryer was at the series’ former manager Rockspring Property Investment Managers before it was purchased by Patrizia at the turn of 2018 in a deal that kickstarted an international expansion for the German manager. Baird joined Patrizia at the start of 2022 from UK-listed property company Hammerson.
Pryer told PERE he expected the change of leadership to inject “extra energy” into the series, offering investors “clearer horizons” in the process. “This is an excellent reboot for investors,” he said. “I genuinely believe it’s a big plus for our investors that get a refreshment of energy and excitement about the series.”
Philipp Schaper, chief executive officer, European real estate at Patrizia, said the firm currently employs approximately 40 executives focused on value-add strategies, which also includes separate accounts and other investment vehicles besides the TransEuropean series. “There is strong value-add expertise here, certainly in London, but also in Germany as well. That’s not just the TransEuropean series,” he said. “It feels like it’s just TransEuropean because it has the most publicity.”
Nonetheless, Schaper added the transition in leadership for the TransEuropean series should be regarded as an opportunity for new talent at the firm to shine. Of the 40 value-add-focused executives, eight are dedicated to TransEuropean. “We have different talent with probably a different level of prominence in the past, but they have similar levels of competence. That, for us, is a major point to underline in terms of succession planning.”
However, onlookers see the leadership change as a key juncture for the TransEuropean series and say fundraising for TransEuropean VIII will be an important test to determine its continued popularity. “Now, we will see if Patrizia can continue that without that team; whether this is a credible story or not,” said one head of Europe for a US manager, who declined to be named. “Typically, investors underwrite a team. Can they still prove to investors they still have the same convictions, strengths and mechanisms to prove their value-add strategy?”
One former senior executive at an investor which has made repeat commitments to the series, who also requested anonymity, said the departures will “signal something to the investors.” However, he said: “Then again, for some investors, they allocate to managers, not just the people. They will consider this, but I don’t see it stopping relationships with Patrizia.”
On a relative basis, Patrizia is marketing the next TransEuropean fund at a good time for the strategy. Indeed, value-add has been by far the dominant risk-return profile for private real estate in Europe this year, with minimal capital raised for others.
According to PERE research, while overall capital raising in the region has been notably down year-on-year in 2023, $8.74 billion has been raised for closed-end funds with the strategy so far this year, significantly more than the second most popular strategy, opportunistic, which has attracted little more than $1 billion.
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