A year of sustained growth for the European debt program with EUR 1.9 billion of new investments / Continued growth of the Luxembourg-regulated PAREC debt fund, with total volume surpassing EUR 4 billion including the EUR 1.2 billion sub-fund into which BVK, as first third-party investor, committed EUR 300 million / Strategic decision to increase lending on transitional assets and developments (build-to-core and manage-to-core loans), particularly future-oriented assets, in order to fulfil investor aims to further reinforce ESG commitments
Allianz Real Estate, the dedicated real estate investment manager within the Allianz Group and one of the world’s largest investors in real estate, has seen its European debt portfolio grow to EUR 10.6 billion in assets under management as at the end of 2020, up by around 15% year-on-year.
The firm delivered EUR 1.9 billion in new investments across the year, with capital deployed by its Luxembourg-based European debt fund, PAREC, increasing to more than EUR 4 billion, up by a third. Overall, the firm’s European debt portfolio is now spread across 12 countries in the region, including a logistics transaction in the Czech Republic – a EUR 185 million participation in joint deal to refinance a logistics and industrial portfolio managed by CTP – which closed in December.
“Despite the COVID-19 pandemic and the respective challenges of 2020, we were able to foster attractive financing opportunities providing improved risk-return profiles triggering our European debt business to continuously grow in size and geographic footprint,” said Roland Fuchs, Head of European Debt at Allianz Real Estate.
“Importantly, we have grown while maintaining our disciplined approach to lending. Our deep relationships with our partners, sponsors and borrowers, coupled with our unparalleled understanding of the market and the expertise of the pan-European debt team, has meant that along with the increase in assets under management, we navigated the crisis with no defaults on loan repayments.”
Third-party commitment and increased focus on financing the future office
In May, Allianz Real Estate secured its first third-party client for its Luxembourg-based debt fund. German pension fund Bayerische Versorgungskammer co-invested with a EUR 300 million stake in a sub-fund valued in total at EUR 1.2 billion alongside Allianz.
At the start of the year, prior to the onset of the pandemic, the European financing team had made the strategic decision to increase the share of investments dedicated to transitional assets and development loans. The aim is to address the increasing investor appetite to invest in ESG-focused loans while financing future-oriented offices – centrally located, sustainably operated ‘smart‘ assets which focus on user experience and wellbeing with a range of value-adding services.
Therefore, the firm completed during the year several high-profile transactions which demonstrate this future-oriented, build-to-core and manage-to-core approach. In July the firm closed a EUR 200 million loan for the sustainability linked development of Arboretum in Paris, the largest solid-wood office development in Europe. In the same month, GBP 139 million was provided to Helical plc to finance the development of Charterhouse Square in London. The team concluded the year with two further such transactions: a EUR 196 million loan to Blackstone to refinance and refurbish two office buildings as well as the construction of a new office building in Amsterdam; while EUR 250 million was provided to Tishman Speyer to redevelop the recently acquired Tour Cristal in Paris into a grade A office.
Roland Fuchs added: “Our success is built on our highly disciplined lending strategy and focus on prime transactions. In addition, we are increasingly lending on transitional or development assets. For example, Arboretum, with its unique design, build process, extensive use of timber, and absolute focus on environmental best-practice during its operational life, is the type of asset that we want to emphasize within our portfolio and the type of transaction the firm will pursue, also for the PAREC fund.”
Three fully established European financing hubs
The year also saw Allianz Real Estate’s London office become fully established as the third European hub for the firm’s regional debt program alongside its teams based in Munch and Paris.
In September, the London-based team completed the firm‘s largest single-loan debt transaction in Europe overall: GBP 400 million (EUR 440 million) for a portfolio of five prime freehold central London offices fully owned by Lazari Investments. Finally, in December, the team finalized a GBP 162 million loan to Blue Coast Capital to refinance three Grade A office buildings in London and one logistics unit in the Midlands.
Looking ahead
Allianz Real Estate is positioned to further grow its European debt portfolio and its European debt fund in 2021 and expects to see strong demand for lending among Allianz group insurance companies and third-party institutional investors.
François Trausch, CEO Allianz Real Estate, commented: “In a year of heightened volatility and profound disruption, Allianz Real Estate has delivered an excellent result in terms our European debt proposition. The team has reacted swiftly to client and stakeholder demands and developed new relationships and deepened existing ones. As the world looks to normalize in the wake of the pandemic, we are very well positioned to meet our ambitions to be a leader in European real estate debt financing.“
