Â鶹ӳ»­

German real estate group Patrizia Immobilien is on track for major growth, with plans to grow its AUM by €2 bn annually, according to Klaus Schmitt, COO of Patrizia Immobilien in Augsburg.

‘Our aim is to grow Patrizia by around €2 bn net per year, although it depends on how markets develop and what sort of portfolios come to market. We’ll have to see if we do any big deals in 2016 that are comparable in size to our acquisition of the Madame Tussauds’ building in London last year,’ he told PropertyEU.

Patrizia acquired the iconic property in May last year on behalf of its client, Fubon Life Insurance Company, the Taiwanese Insurance company, for £332.5 mln.

Including sales and acquisitions, Patrizia completed €8.7 bn of real estate transactions in Europe last year. This includes acquisitions of €4.4 bn of property across Europe, of which €1.7 bn was in Germany. ‘We’re a very active buyer and we have a lot of equity available to invest because investor interest is so strong. We are looking at big portfolios that could come to market,’ said Schmitt.

Further sales are on the cards
The group also sold around €4 bn of assets last year. Its biggest disposal was its sale of the Süddeutsche Wohnen Group (SÜDEWO) to Deutsche Annington – now known as Vonovia – for €1.9 bn in June. The portfolio comprises 19,800 apartments in Baden-Württemberg, Germany. Patrizia initially acquired SÜDEWO - then LBBW Immobilien - from LBBW in February 2012. Also, in November, Patrizia sold its 13,600-unit Harald residential portfolio to German residential landlord Deutsche Wohnen for €1.1 bn.

Further sales are on the cards this year, according to Schmitt: ‘We are evaluating what we could sell this year and we might bundle two to three properties together in portfolios to sell in 2016. I don’t think we’ll sell as many properties this year as last year, though.’

Going forward, there is no optimal target size that Patrizia is trying to attain, he said: ‘We’ve stopped discussing a potential target size for our company. Our aim is to grow it by €2 bn net per year. That’s our target. There is no upper limit or optimal size.’

Interestingly, Schmitt says that Germany may not remain Patrizia’s dominant market going forward. Today, its home market accounts for the majority, or 67% of its portfolio, with an additional 12% invested in the UK and Ireland, 6% in the Nordics, 5% in Benelux countries and 4% in France or other countries.

‘It’s not unlikely that our international business could overtake our German business but it depends on how much international equity we attract. It also depends on whether we are able to access large portfolios abroad in the same way we have been able to in Germany.’

Today, residential assets account for 43% of Patrizia’s portfolio, followed by offices (31%) and retail (12%). According to Schmitt, Patrizia is looking to become more active in Italy this year, likely in the retail and residential sectors; it is starting to eye Poland, too.

‘We’re also very interested in the retail sector and are well-known for that in Germany, which is why consultants bring us off-market retail deals. Typically, we expect retail yields of between 5.75% and 6.5% in Germany,’ he said.

Patrizia is also active in the UK value-add segment and in the residential sector there. ‘We’d also like to invest more in Europe’s residential sector this year because many of our investors see resi as a safe haven,’ said Schmitt.

The group will launch its first logistics fund this year, Schmitt said. ‘It will have a pan-European focus and we already have some soft commitments for the fund.' He declined to provide further details.

The group’s business is divided into three segments: pure third party business with €8.4 bn of AUM; its co-investment business, with €6.5 bn of AUM and and a smaller bucket of ‘principal investment’, with €1 bn of AUM (figures at end-September 2015). The group had €17 bn of AUM as of end-December 2015.