Affordable housing with reliable investments
“Residential rentals are a very stable investment for institutional investors like pension funds and insurers”, said Michael Fink, Managing Director of Catella Residential Investment Management. “Affordable housing funds are of particular interest as they are least affected by ‘the black swan’ events that have a major impact on the economy and thus our prosperity. That includes the 2007 credit crisis and of course, the corona crisis most recently”.
"The top segment is more likely to have to deal with vacancy in a crisis," said Fink. "That’s understandable, because if your income declines, then it’s harder to get a higher rather than lower rental yield. Furthermore, there are fewer new tenants available for expensive homes if there are economic downturns. Crises have a much lesser effect on affordable housing”.
First funds for German investors
Although it seems logical, very few German institutional investors invested in residential property funds. “That situation is very common in the Netherlands and in Scandinavia”, said Fink. “At Catella Residential, we also wanted to encourage German institutions to invest in residential housing. That resulted in two funds – #1 and #2. The established funds are pan-European, which is a particularly special feature. “This gives us a better spread, which includes portfolios in residential complexes across various European cities”.
After two successful funds aimed at German investors, Catella wanted to establish a third Residential Fund that was also accessible to foreign investors. However, that was easier said than done. "There was a technical barrier to begin with, as we didn't have the right licenses to put the fund on offer internationally," says Fink. "We additionally lacked the knowledge and connections to market the fund from a commercial/strategic perspective, which is why we began the search for a partner”.
“We always noticed in our conversations that CBRE was willing to go the extra mile”
CBRE as a commercial partner
Fink explained that there were several candidates. "We chose CBRE's Capital Advisory team because we felt we had the best click with them. Overall, CBRE has a good reputation when it comes to relationship management. We always noticed in our conversations that CBRE was willing to go the extra mile”.
Making an impact together
Moreover, Catella and CBRE were on the same page when it comes to impact, says Fink. "At Catella we take our social role seriously. We invest in a basic necessity of life: living space. The choice to focus on affordable housing is not only motivated by stability and returns. We also think it is simply important that everyone can find a suitable home”.
“CBRE helped transform us an impact fund. This makes Catella Residential’s European Residential III Fund the first among European residential housing funds to comply with the Global Impact Investing Network’s guidelines”.
“We want to see reductions in our environmental footprint through our investments in sustainable buildings, which CBRE also has strict objectives to meet. For instance, we set requirements for CO2 emissions, water consumption and waste processing. Capital Advisors helped us turn the fund into an impact fund. This makes the Catella European Residential III Fund the first European residential fund to comply with the GIIN guidelines (Global Impact Investing Network). That’s a first, and something we can be proud of”.
"We also managed to attract investors from France, the Netherlands and Norway, in addition to interested parties in Germany”.
Interest from foreign investors
“The Impact Fund was launched in 2019. CBRE is bringing it to the attention of foreign investors on our behalf”, said Fink. That approach has already paid off. "We are now ready for our fifth closing. In addition to German parties, we also managed to attract investors from France, the Netherlands and Norway. Moreover, we notice that interest in the fund is growing, thanks to the stable cash flow."
Next steps: an ‘energy positive’ residential housing fund
Catella is ready to tackle the next challenge coming its way. "[To reach this challenge], we work together with the French company Elithis. They have succeeded in building an energy-positive residential tower at regular development costs. The building therefore generates more energy than it consumes. Those savings – or rather, profits – then flow back to the tenants, who have lower housing costs. In short: the complex unites all our impact objectives. "The intention is that there will be a new international fund with only energy-positive homes in the portfolio. "We want to work with CBRE again for the commercial development, structuring and marketing," says Fink. "They are just as enthusiastic as we are, so I look forward to working together."