Patrizia has held a final close for its first real estate impact fund, attracting close to €300 million for investment in social and affordable housing and related social infrastructure projects across cities in western Europe, PERE can reveal.
Patrizia Sustainable Communities was launched in January 2022 with a target to raise €500 million from investors, and was closed in December last year. The fund attracted commitments from 10 institutional investors internationally, including Danish pension funds AP Pension and PKA.
PERE understands the firm, based in Augsburg, Germany, is targeting a net IRR of 12 percent from the fund’s investments, alongside social and environmental impact objectives. These include housing more than 7,500 residents in affordable homes across 25 cities in Europe, developing homes that are operationally net-zero carbon, and tackling loneliness through the provision of community infrastructure. The fund reports under Article 9 of the Sustainable Finance Disclosure Regulation.
The firm will apply 50-55 percent leverage to the fund’s investments, giving it an investment capacity of around €500 million. Investments made through the fund so far, representing around half of the vehicle’s firepower, include a project to develop apartment housing for more than 1,600 low-to-middle income residents in the outskirts of Dublin, Ireland. A library, community centers and crèches are also part of the project.
In the UK, the firm has made two initial investments to forward-fund a €115 million project to build 70 single-family affordable homes in Milton Keynes and 80 in Bishop’s Stortford, in addition to social housing units in both sites.
Other core markets for the fund’s investments include Benelux, France, Germany, Spain and the Nordics.
According to Marleen Bikker-Bekkers, the fund’s manager and head of European investments at Patrizia Global Partners, the firm’s multimanager business, the investment remit for the vehicle has evolved amid the price correction of the past year. The original plan was to invest most of the fund’s capital in new-build developments. But the expectation now is that around half of the fund’s capital will be used to reposition assets.
“When we started this fund, we were looking more at developments. It was very difficult to acquire existing buildings at prices where we could make the projects work. But increasingly we see that repurposing old offices into residential is a possibility because of the price movements. We now see projects where we can achieve our social, environmental and financial goals, which two years ago we would not have been able to,” she said.
For repositioning projects, the firm aims to reduce carbon emissions by at least 40 percent, and targets an Energy Performance Certificate rating of B for repositioned assets. For new developments, it targets EPC A.
“More than 80 million people across Europe are overburdened by housing costs, so our intention is to provide affordable and social homes – that are sustainable and energy-efficient – for the lower-to-middle income brackets of society in particular,” said Bikker-Bekkers.
Although the fund fell short of its target raise, Bikker-Bekkers hopes it will be the first iteration of an impact series for the firm.
“In the current environment that was a very good result for us,” she said.
“Impact is definitely on investors’ agendas and is an important theme for them, but it is still early days in terms of deployment. Many investors are still thinking about how to define and execute on their impact strategy. And when the markets changed, a lot of investors pulled back on taking steps into impact investing as they needed to shift their focus elsewhere in their portfolios.”
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