MIPIM 2018: Zurich to acquire $1.5bn in global real estate in 2018 – Exclusive   

The Swiss insurer’s investing plans include a return to one particular western European market after a 14-year absence.

Zurich Insurance Company plans to purchase $1.5 billion worth of real estate assets globally this year, sustaining an active buying streak that has continued for the past few years, PERE has learned.

The Swiss insurer currently has $14 billion invested in direct real estate globally, the largest components of which are in Switzerland, with $6.3 billion, Germany with $3 billion and the US with $2.5 billion. With the new acquisitions, Zurich expects to increase its property holdings to $15 billion and its allocation in the asset class from 6.8 percent to 7.2 percent of its overall portfolio. At the same time, the insurer also anticipates making about $500 million in dispositions.

Zurich’s investment drive will be focused on Europe and the US, and to a lesser extent, the Asia-Pacific region and Latin America. “We bring money to where we think there is good value in the market,” Cornel Widmer, head of group real estate, told PERE in an interview at MIPIM.

“We still want to deploy quite a large number to the US,” he said. “We have recently added markets such Minneapolis and Nashville. We see interesting dynamics in those markets, so we’re not just focused on big cities on the coasts.”

Meanwhile, in Europe, Zurich expects to be most active in Germany, Italy, Spain and the Netherlands. Additionally, the insurer plans to add a new market to its European footprint – France, returning to the country after being absent for 14 years, following the sale of most of its French business to Italian insurer Generali in 2004.

“For the first time in many years, we are considering the French market,” Widmer said. “We did not have the appetite for France before, but we are quite positive about what’s going on in France. The overall economy is improving and has the potential to be picking up quite nicely.”

To mark its reentry, Zurich is in the middle of the selection process for an asset manager for France and expects to award a mandate by the end of the first half of the year. The insurer expects to invest $300 million to $400 million of equity by the end of the year, with the goal of building a core/core-plus portfolio in the country before long.

The company has executed up to $1.5 billion of real estate acquisitions each year for the past several years, with a target size of under $100 million for diversification purposes, Widmer said. Zurich has already executed transactions in Spain and Portugal this year and its pipeline for 2018 also includes deals in France.

The French property mandate would mark the third time Zurich will have hired an external manager in real estate. In 2014, it hired CBRE Global Investors to target UK real estate opportunities and in 2016, issued UBS Asset Management a €400 million mandate to invest in office, retail and industrial real estate in Italy via the Zurich Italy Real Estate Fund.