Corporate overview
Eurazeo is a leading global investment group, with a diversified portfolio of €33.5bn in assets under management, including €23bn from third parties, invested in around 600 companies including real estate platforms. With its considerable private equity, private debt, real estate asset and infrastructure expertise, Eurazeo accompanies companies and real estate platforms of all sizes, supporting their development through the commitment of its 400+ professionals and by offering deep sector expertise, a gateway to global markets, and a responsible and stable foothold for transformational growth. Its solid institutional and family shareholder base, robust financial structure free of structural debt, and flexible investment horizon enable Eurazeo to support its companies over the long term.
Eurazeo has been embedding ESG in its business model as early as 2008. Since then, it has continuously improved its ESG strategy and launched its comprehensive O+ policy in 2020. The Eurazeo Real Estate team has adopted an above standard ESG approach and built an in-house specific ESG framework, in line with Eurazeo O+ strategy, international and local regulation as well as Science Based Targets (SBTi). The ERE team adopts a holistic approach to ESG at all stages of the investment cycle and, based on SBTi, aims to reduce 60% of GHG emissions per sqm by 2030 vs 2021 baseline.
Eurazeo has offices in Paris, New York, London, Frankfurt, Berlin, Milan, Madrid, Luxembourg, Shanghai, Seoul, Singapore and São Paulo. Eurazeo is listed on Euronext Paris. ISIN: FR0000121121 – Bloomberg: RF FP – Reuters: EURA.PA
Sector forecasts
INDUSTRIAL: The industrial sector has continued to demonstrate structural resilience and significant supply/demand imbalance, especially in urban areas. This has in part been led by the persistent expansion of e-commerce adoption and the subsequent growing expectation of shortened delivery times. Coupled with the scarcity of industrial land which is being prioritised by higher use classes such as residential in and around metropolitan cities, we believe this will remain a strong growth sector for those able to unlock opportunities.
HOSPITALITY: The leisure sector has enjoyed a significant rebound since the downturn related to the COVID-19 pandemic, demonstrated ability to capture inflation in the top line benefiting from the ever-increasing demand in experiential leisure. We believe this sector is poised to benefit from evolving work dynamics that offer greater flexibility, and there’s a unique opportunity to cater to travellers seeking a blend of business and leisure experiences. Hotels can seize this chance to adapt and provide innovative solutions, meeting the changing needs of a more diverse clientele.
RESIDENTIAL/OFFICE: The COVID-19 pandemic has accelerated changes in the ways we work and live. Office spaces are evolving to accommodate flexible usage, with a focus on collaborative environments and hotel-like amenities to attract and retain talent. Meanwhile, residential requirements are shifting towards homes with an extra level of amenities and service tailored to specific age groups (eg, student, families, and senior). This transformation aims to create appealing workspaces and dwellings that foster a sense of community. The increased level of services provided in such assets are shaping a new era of work and living that operational real estate experts like Eurazeo are well positioned to capitalise on.
HEALTHCARE: Europe’s rapidly ageing population is necessitating the expansion of private capital investment in healthcare infrastructure (eg, clinics, specialised residential care, nursing homes and senior living). Pressure on public finances, coupled with the significant barriers to entry due to the strict regulatory framework, capital intensity and highly specialised nature of the sector offer a significant opportunity to investors well positioned to navigate the landscape. Furthermore we like the decorrelation to GDP of the top line drivers in this sector, enabling better risk-adjusted returns for investments in the operations and real estate together.
Investment principles & strategy
Eurazeo’s real estate team focuses on operational real estate investments across Western Europe acquiring operations and real estate together. We believe that a strong alignment between the operator and the asset owner has the potential to deliver a better risk-adjusted return vs traditional real estate investments. This is especially relevant in today’s higher interest rate environment and current market volatility; platform investing offers not only an improved diversification of returns, where the drivers of the business conducted from the premises are not necessarily correlated with those of the real estate, but also attractive levels of control, in relation to managing risk, deployment pace, the ability to tap into multiple levers to generate value, and implementation of the ESG objectives.
Eurazeo targets businesses that use, manage and own their own real estate assets that adhere to these six key pillars which underpin the group’s investment philosophy:
- Fundamental market opportunity
- Asset-backed businesses where real estate is a large majority of the value
- Scaling potential through platform aggregation strategies
- Attractive financial profile
- Strong downside protection in the form of durable in-place income, conservative financing and future proofing
- ESG as an integral component to value creation and risk mitigation
Strategic corporate development
Eurazeo’s real estate division was established in 2015, to build out a strategy that leverages the group’s private equity DNA by focusing predominantly on operational real estate investments across Western Europe. With offices in Paris, London and Luxembourg, and an investment team with a complementary skillset in both private equity and real estate, Eurazeo is well positioned to execute this strategy with confidence. Central to our investment strategy is ensuring a holistic approach to sustainability, not only adhering to international and local regulations, but also our own internal Eurazeo O+ Strategy which seeks to achieve carbon net neutrality (which we regulate via the Science Based Targets initiative) and foster a more inclusive society.
With a proven track record, well-established investment team and the support and resources of Eurazeo, a significant private markets investor, the real estate division seeks to cement itself as a leading real estate investment management firm focused on operational real estate where we believe there is potential to deliver outperformance vs traditional real estate sectors.
We strive to organically grow and continue to open up our investment programme to institutional capital through closed-end funds and tailored investment vehicles, as well as co-investment opportunities.
Performance verification
The Eurazeo Real Estate strategy measures its performance against relevant benchmarks.
The activities of Eurazeo Funds Management Luxembourg (the management company) are overseen by Luxembourg’s independent financial regulatory body the CSSF. The real estate funds’ performance verification process follows the guidelines set by the CSSF.
COMPLIANCE STATEMENT
Due Diligence against fraud and corruption prior to acquiring an investment:
Standard Compliance Due Diligence including:
– A “mandatory Anti-corruption Compliance Program Q&A”
– A “Basic Screening” of the target company and management via Bureau van Dijk RDC tool
Extensive Compliance Due Diligence – Based on “Standard Compliance Due Diligence” outcomes, and on a risk assessment conducted by Eurazeo Compliance and Investment Teams. This may include without being limited to:
– An “Extensive and tailor-made Q&A” including collection and review of supportive documentation
– An “Extensive Screening” of the target company and affiliates, management and beneficial owners via Bureau van Dijk “Compliance Catalyst” tool
– An “In depth Due Diligence” conducted with the assistance of a third-party provider (ADIT or equivalent)
