TwentyTwo Real Estate, a fledgling firm established last year, has orchestrated a maiden deal by investing in a €1 billion of French residential assets from private equity firm LBO France and Deutsche Asset & Wealth Management.
Founder Daniel Rigny, who is a former dealmaker in Europe at Deutsche Bank and more recently at Perella Weinberg Partners in London, said it was the first investment for the new venture.
For the virgin deal, TwentyTwo Real Estate has organised and managed a vehicle called Powerhouse France to buy nearly 7,600 units of the Financière Selec portfolio that LBO France and Deutsche Bank acquired in 2006.
It revealed the Powerhouse consortium comprised Massena Partners and funds advised by Farallon Capital Management, which are respectively an independent investment boutique dedicated to high-net-worth private investors looking for out-performing investments and a San Francisco-based global investment manager that manages discretionary equity capital of around $19 billion, largely from institutional investors such as university endowments, foundations and pension plans.
In a statement trumpeting the investment by Powerhouse, Rigny said: “The acquisition of this substantial portfolio of residential assets represents a rare opportunity to acquire long term inflation linked assets providing attractive risk adjusted returns and an attractive cashflow for our investors.”
He added: “France will be an area of particular focus for us going forward as we are witnessing attractive acquisition opportunities in the country emerging from the current macro-economic situation.”
Frank Noël-Vandenberghe, founder of Massena Group, added that the current “high-volatility, low-interest rate market environment” had led to the appetite of private investors for private equity investments that presented a “clear investment thesis and an attractive return expectation”.
Meanwhile, Nicolas Giauque, a managing member of Noonday Asset Management, which acts as a sub-adviser to Farallon in Europe, said: “We are delighted to invest in Financière Selec, which we believe combines a strong and stable cashflow profile with a highly experienced and professional operating management team.”
LBO France, which has its roots in mainstream private equity but also manages opportunistic real estate funds, and its partners Deutsche Asset & Wealth Management, formerly known as RREEF Real Estate, initially acquired 10,200 homes let to power company EDF on 12 years leases in 2006. It went about selling 25 percent of the portfolio over time, or 2,500 homes.
This latest deals sees the partners offload the remaining 75 percent in one go. The parties to the deal declined to say how much had been paid for the assets. In March, however, they said they had refinanced the portfolio with a €620 million mortgage debt facility.
Stéphanie Casciola, head of real estate funds at LBO France, stated: “After the refinancing in March, the sale of the Selec portfolio stands out again for its size and constitutes one of the largest recent transactions on the French residential real estate market.”
Stéphane Billet, deputy chief investment officer, Europe for Deutsche Asset & Wealth Management’s real estate investment business, declared: “The success of this operation and the value creation are a testament to the proactive asset management carried out on the portfolio.”