EQT Real Estate: The urbanization opportunities
EQT’s first real estate fund has had a flying start. With six investments made across its core geographies, the fund has successfully identified and acquired value-add opportunities in key urban locations.
By using the extensive network of EQT’s industrial advisors, knowledge from the “local with locals” approach and the on-the-ground teams, EQT Real Estate is persistently evaluating new real estate investment opportunities.
For one of the fund’s most recent real estate investments, Atricom in Frankfurt, the fund has signed a lease agreement with Deutsche Bahn. The tenant is the world’s leading global logistics provider DB Schenker Deutschland. The new lease is a significant step for EQT Real Estate and underpins the success of its ownership and development strategy, whilst it is also an important addition to the city district Niederrad in Frankfurt.
Schenker Deutschland will move its headquarters, with over 500 employees, to the building during second quarter of 2018
Sustainability is integral to EQT’s investment rationale and the ideology is at the core of every investment that the funds make. EQT always looks at how to best reduce factors such as water consumption and greenhouse gas emissions as standard practice, whilst also improving energy efficiency at the same time. The Atricom property in Frankfurt is now undergoing a comprehensive overhaul, with the aim to modernise the building and office space, whilst ensuring it has a truly sustainable footprint.
EQT Real Estate in retrospect
EQT started to investigate opportunities in the real estate sector already back in 2015 to broaden the investment strategies platform. Real estate industry veteran Rob Rackind joined EQT Partners to establish a specialist team with a proven track record in real estate across Europe. Since then, the team has grown to include 13 investment advisory professionals in London and Stockholm.
“The prospects lie in identifying under managed, un-loved assets in these gateway cities and the approach is to refurbish, reposition, redevelop, and add key amenities. Once we identify opportunities where EQT can capture that value creation, we strategize how best to improve the asset for occupiers looking to capitalize on these trends”, says Rackind
The first acquisitions were Rue Lauriston and Smart Parc, two distressed office projects in Paris, announced in June 2016. Both assets presented the opportunity to create high-quality office spaces in central Paris, where supply is limited and expected future demand is solid. Later that year, two additional acquisitions were made; Technologiepark, a 116,000 square meter office park in Cologne, and a residential project containing 146 studio apartments in Stockholm.
In December 2017, EQT acquired a 13,600 square metre property located in Paris. The multi-let office property offers attractive value add opportunities through partnerships with existing tenants and the potential to upgrade in future.
“There is a huge opportunity in urbanization”
As urbanization proceeds and subsequent migration from urban to non-urban areas continues, the cities are facing higher demands for infrastructure investments and injections of capital into undeveloped and under resourced areas.
Cities like Paris, Stockholm and the seven largest German cities are sometimes referred to as “gateway cities” and these locations are becoming increasingly important on a global scale. The gateway cities are seeing greater GDP growth than the surrounding countries, primarily due to urbanization trends.
“We see industry appetite shift from core historical investment destinations, such as London and New York, to new global gateway cities like Paris, Stockholm and key cities in Germany. These cities are the clear targets in focus for EQT’s Real Estate fund”, says Rob Rackind, Partner and Head of EQT Real Estate, Investment Advisor to the fund.
Rackind continues: “This is a positive trend. There is an opportunity in these locations to capitalize on this structural shift and to create the best possible spaces for occupiers and residents. Millennials are a perfect example of this trend in action; as they migrate to more affordable, peripheral areas of key cities, corporate occupiers look to do the same, therefore shifting not only the talent pool, but the demand for it also”.