In a context of low interest rates where professional real estate investment faces the challenge of uncertain commercial property occupancy rates, professional real estate investment has gone through a period of in-depth questioning. Faced with the uncertainties linked to changes in consumption habits, identifying investments in line with stable return objectives has become a real challenge
To face this challenge, Sylvie Proia and her team have taken the gamble of innovating and reversing the traditional approach to real estate investment. Based on an attentive listening of the market and on more than two decades of experience, they are today unveiling the flagship real estate investments for the period to come. The target real estate investment must meet return criteria, while being part of a balanced and secure investment portfolio. To achieve this, it must be the subject of a careful selection in terms of location and equipment of the property itself. But not only that, the quality and stability of the tenant are key elements in determining future cash flows.
Sylvie Proia, you are Co-CEO and partner, Head of Business Development at Unik Capital in Luxembourg. In your opinion, what is the strategy to adopt in the selection of professional real estate at the dawn of 2020?
We are constantly analysing statistical and economic data to select, throughout Europe, the sectors of activity for our future investments. The range of targeted activities and geographical markets must of course meet growth and return objectives, but not only that. We are also committed to ensuring that all investments are relatively agnostic with respect to the economic climate, through a harmonious mix of cyclical to counter-cyclical activities".
Can you tell us more about the sectors that you think offer real opportunities for real estate investment?
I would say that we should no longer reason in terms of unit choice of properties, but rather adopt an approach based on macro-economic analysis and asset selection by major market segments. For example, we have identified the following three inescapable trends. Firstly, the ageing of the population in Europe, which is accompanied by increased medicalisation financially supported by the social systems of the various States. The second line of thought accompanies the intensification of tourism flows in Europe and the needs for hotel infrastructures. Finally, the third is linked to changes in consumer habits. I am clearly thinking here of the development of e-commerce with its double-digit annual growth in Europe. The shortage of warehouses adapted to e-commerce makes it a third privileged target. For each sector, we identify the countries where growth and needs are the most significant. As you can see, the problem of targeting goods is moving away from the traditional unit selection to get closer and closer to the top-down approach of equity managers!
Beyond sector and geographic selection, can you explain how the intellectual approach itself innovates compared to the traditional approach?
We have completely revised our methodology. Rather than selecting assets and then looking for tenants, we select high quality, high-potential operators in each target sector to accompany them in their development throughout Europe. To ensure a good balance in the portfolio as a whole, we consider both major retailers already well established and looking to expand, as well as new players entering the market, chosen for the dynamism of their innovation and ethics. Finally, we look for partners who share our values! We develop a partnership with these operators based on common objectives, complementary skills and strong synergies. Our signature is to reverse the approach to traditional property investment. Trust is the cement of a common success with these partners who can thus focus on the operation, their own core business.
Finally, you are moving away from pure property selection.
That's exactly what it's all about. In each target sector, we select our partner brands for their ethics, their quality of service, their choice of location and their appetite for innovation. The core of our due diligence is therefore focused on the partner brands themselves, understanding their expansion model and then choosing the ones that best suit us. This is then translated into a joint operation with the company that will be renting and us owning the walls. The key constant remains our target of real estate assets, which is exclusively aimed at Prime, Core/ Core+ type investments with a patrimonial vocation, new and of high quality throughout Europe. This selection enables us to generate almost immediate income from the investments
The objective of your investment solutions is to give privileged access to exclusive real estate assets in Europe to categories of professional wealth management investors, beyond professionals in the sector. Can you explain the resulting constraints and opportunities?
Our real estate investment products are aimed at wealth management professionals who go well beyond real estate professionals. We therefore pay particular attention to securing real estate assets. This would not be complete without the governance that surrounds all the processes in the life of the investment structure. In our approach, compliance and risk management are essential. Thus, our partnerships that generate synergies do not stop at the investments themselves. On a daily basis, we rely on the expertise of our partners, management companies and custodian banks, to provide all the necessary governance for our projects.
Until now, few real estate investment professionals have attempted such a privileged partnership approach with retailers. What are the first returns observed in the market segments of these new solutions?
They are really positive! We feel that we have, through this new approach, designed an investment solution that will not only accompany the development of growth sectors for the coming decade, but will also meet the expectations of our investors. Moreover, the market is already giving Cacik Fund SCA SICAV-FIAR, the Unik Premium sub-fund, the best reception. The project is generating excitement, which confirms our undeniable interest in setting up a synergistic approach based on strong partnerships between experts who thrive in their core business.
Thank you very much, Sylvie, for sharing with us this vision and these particularly interesting experiences.