Patrizia launches its first pan-European residential fund – Exclusive

The Augsburg-based manager’s new offering is the latest in a string of open-ended core pan-European residential funds that have launched in the past two years.

Patrizia residential
Heinrich Heine Gardens, Düsseldorf: one of the fund's seed assets

Patrizia has launched an open-ended core fund targeting the pan-European residential sector, with the aim of initially raising €1 billion of equity, PERE has learned.

The firm declined to comment on the capital it has raised to date, but said existing and new institutional investors based in Europe and Asia had committed to the fund.

Patrizia Living Cities Residential Fund is its only residential fund with a pan-European geographic focus, as well as its first to be marketed to investors across the region, instead of solely German clients. The vehicle is the latest in a string of open-ended core pan-European residential funds that have launched in the past two years, including Aberdeen Standard InvestmentsAberdeen Standard Pan European Residential Property Fund and Catella‘s Catella Pan-European Residential Fund III, both of which have a €1 billion target, according to PERE data.

The fund is expected to have a 35 percent loan-to-value ratio limit and focus on long-term buy-to-hold strategies. Approximately 20 percent of the fund’s capital will be invested into in-demand residential sectors such as co-living, retirement and student housing. The firm is targeting net returns of 6-7 percent.

Patrizia has seeded the fund with a €650 million portfolio that was amassed through a series of off-market deals, including the acquisition of a nine-building residential portfolio in the Berlin metropolitan area, Dresden, Duesseldorf, Frankfurt, Hamburg and Stuttgart; the purchase of apartment development projects in Munich and Copenhagen; and the acquisition of a dozen residential assets in Amsterdam and Rotterdam. Patrizia also has a pipeline of approximately €1.5 billion in additional transactions earmarked for the fund.

The vehicle is launching at a time when liquidity for residential assets in many of Europe’s major urban areas has increased significantly since 2009, with investment volumes growing from €5 billion in 2009 to €50.8 billion in 2018 as the sector has matured and investment opportunities have grown in the region, the firm said.

“Despite favorable economic conditions, European housing markets have never been more in the focus of politicians given current demand/supply imbalances and the resulting affordability issues,” Patrizia wrote in a recent report on the sector. “But urbanization is here to stay and housing construction is not large enough at the moment to mitigate this imbalance any time soon.”

Patrizia has invested for 35 years in the European residential sector, including through its TransEuropean fund series. For that, the firm manages $10 billion in residential assets on behalf of third-party capital and is generating returns in excess of 15 percent in the strategy. It accesses local deals through a network of 200 local residential investment professionals.