MANIFESTO

Fragmentation

We believe that uncertainty has always been the norm when investing on value-add developments. It is the reason why we deliver strong financial return.

But we are facing an unseen wave of fragmentation of capital allocation. It requires asset specialism, cross-over between asset classes and a shift towards operated models (management contracts or MSAs) to blend them when appropriate with traditional leases to deliver a maximized value creation.

Complexity

We believe that value creation is getting more complex while embedding fast-changing regulations (regional, national and local), long-lasting inflation of the cost or resources (talents and materials) and uncertain macro-economic environment.

It does shake a real estate industry based on risk premium vs. risk-free bonds and competing vs. many others capital allocation options (listed stock, infrastructure, private equity…).

Emergency

Working harder, better, stronger, faster to face ESG emergency.

We need to work harder and bold decisions are required.

ESG is better for our planet, people and therefore for our business.

We need to deliver faster to address emergency.

We need a stronger real estate industry. And strength lies in thought leadership, public-private partnerships and a shared vision.

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A NEW PARADIGM

ESG TARGETS DELIVERED.

IMPACT AND RETURN.

The built environment represents 40% of greenhouse gas emissions. Water, soil, biodiversity are not (yet) considered as key assets. Climate change risk is not embedded (enough).
Real estate stocks are stranded. Massive amount of capital will flow to future-proof the built environment.

Occupational requirements for low-carbon offices compared to development pipeline of high-quality green space from now to 2030 is significantly imbalanced (gap of 50 to 70% depending on markets).

Cost of inaction is huge. Decarbonization and climate change adaptation requires clear and tangible ESG targets delivered to drive tenants and operators’ attraction, enhance return and protect value.

BROWN TO PRIME. TARGETED REPOSITIONING, AT SCALE RETROFIT

45 million sqm i.e. 3/4 of Paris region office stock is needing future-proofing capex (retrofitting and repurposing) to meet clients’ expectations (ESG, placemaking, spaces).

15 million sqm i.e. 1/4 of Paris region office will become vacant in the coming 10 to 15 years creating brownfields that will require to get converted and redeveloped to regenerate entire neighbourhoods.

Changing market patterns requires focused and bold investment theses. We see the rise of either ‘bespoke’ value-play capital for brown to prime repurposing or conversions on carefully targeted assets or ‘at pace at scale’ volume-play capital for retrofitting existing stranded portfolios.

GO BEYOND TRIPLE NET.

CURATED INVESTMENTS STAND OUT.

Real estate investment requires long term triple net leases to make buildings a yield product with a predictable risk premium vs. bonds while competing with many other capital allocation options (listed stock, infrastructure, PE…).

Fast-changing end-users needs, demanding tenants and sharp competition are challenging business plans. Tenants, clients and end-users are experience-driven, seeking flexibility and value for money. Curated places and spaces are needed to bridge the gap. Retail, F&B, hospitality and co-X operators can help investors bridging the value gap.

Investors must shape client-centric developments with ‘as-a-service’ operating models (integrated or through partnerships) to curate their buildings and create long-lasting value-creation combining leases, management contracts and MSAs.

INTENSITY OF USE.

PUBLIC-PRIVATE DIALOGUE.

In the office sector, for occupied buildings that are well located and not due to get vacated because of sub-markets’ changes, the average effective utilization rate is below 50%.

In the living sector, nearly 10 millions residential units are under-occupied. The stock is significantly imbalanced vs. demographics and urban patterns requiring affordable housing, student and senior accommodations.

Alternatives (student, senior, hospitality, life science, data centers, logistics, education, health, entertainment) are attractive but facing challenges : complex sourcing due to granular markets, new ways of investing requiring a hybrid real estate x PE business plan and partnership approach with local authorities.

Mixed developments, intensity and use value must be placed at the heart of developments with a local approach caring the urban, market and political context.

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