Patrizia has hit the hard-cap of its seventh value-add, pan-European private real estate fund.
Paul Hampton, managing director at the Augsburg, Germany-based firm, said approximately 65 percent of the €750 million in equity raised for TransEuropean VII came from investors new to the series, thanks largely to the manager’s distribution channels.
The TransEuropean series was inherited by Patrizia when it acquired Rockspring Property Investment Managers in 2017, after which it was able to benefit from a wider pool of investors, many of which come from Germany.
Hampton said: “Undoubtedly, we benefited from Patrizia’s distribution capabilities this time around.
“But fundraising is never easy. Investors always have a choice. The fact that this team has been together for a long time is pretty unique, though. That stability, at this point in the cycle, must have been attractive.”
Hampton, a 22-year veteran at Rockspring, then Patrizia, said TransEuropean VII was oversubscribed, suggesting that as much as €1 billion could have been raised ultimately. That would have been twice the original €500 million target set when the fund launched at the end of 2017. Of the merged business, he said: “I think our vertically integrated operating platform has made investors very comfortable.”
The series’ performances will have helped attract and retain investors too. Since the global financial crisis, it has generated a gross 24.8 percent internal rate of return. TransEuropean VI is tracking a gross IRR of 17 percent from the sale of approximately 30 percent of the vehicle’s assets. That fund was closed in the summer of 2016.
Currently in its liquidation phase, should the remainder of TransEuropean VI produce similar returns to the first exits, it would mean the series would exceed its carried interest hurdle rate for the second fund running after doing so for TransEuropean V, which was closed on €350 million at the turn of 2013.
TransEuropean VII has approximately €1 billion in dry powder remaining, including credit facilities, with which to make acquisitions in a post-covid-19 marketplace. Hampton confirmed approximately 30 percent of the equity has been drawn so far, predominantly for logistics investments.
He said office investments have also featured, but, given current uncertainty relating to workplace habits after the pandemic subsides, the fund would be pausing outlays in the sector in the near term. “We have leaned on our asset management and research teams to help make sense of what’s going on. But I don’t think this will change our views that the war for talent will remain at the heart of it all.”
Hampton also said hotels and retail assets could feature for TransEuropean VII. Of hotels, he said: “I think it is fair to say that right now the opportunity is not one we feel compelled to go for. But when the liquidity dries up, there might be some interesting, under-capitalized operator deals to do in 2021 onwards.”
On retail, he added: “We can invest in retail, but I see no need to dive in at the deep end. That said, during the coming two-three years there could be some fantastic opportunities in this space.”