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Interview with Managing Director Étienne Marcot

In our section "Expert Interview" you will get insights into the real estate market and into the knowledge of our experts. This is followed by an interview with Étienne Marcot (Managing Director France) on the topic core manufacturing.

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Étienne Marcot - Managing Director

What is core manufacturing?

Largely by virtue of the experience of its senior managers, one of the areas of expertise of PATRIZIA France is the creation of value by repositioning or redeveloping real estate assets that are obsolete, obsolescent or unsuited to their environments. For example, the idea is to carefully reconsider the conditions of use (technical, social, environmental and, of course, economic) of an office property that is in a good location yet does not meet the current needs of its tenants in order to restore tenant demand. This is what we call core manufacturing. 

The repositioning of assets can also involve alternative strategies. Over the course of our careers, we have transformed or divided numerous properties, which is another way of generating value, not only bringing properties up to date but also resizing them or changing their purpose in order to ‘cling to’ the demand of the market and continue evolving.

Through the need to reposition assets dictated by its primary objective, optimised liquidity risk management, PATRIZIA supports and inspires the creation of value, underlining our corporate motto ‘Values Decide’ in the process.

In this context, sourcing by mutual agreement, it is essential to be able to find good opportunities aside from the usual invitations to tender.

How do investors perceive this strategy?

At the moment, property markets are being constrained by an environment of low or even negative interest rates that are putting pressure on the rates of return of secure assets as never before. In other words, the trend in favour of ‘risk-free’ is extremely heightened at the moment, which throws the potential long-term resistance of market values into question. 

In this context, we believe that one of the aspects of our profession and expertise as we see them is to identify anomalies in the market, be they economic or structural, and to implement rational corrective measures that will enable us to bring the asset into the field which supports the lowest risk premium. Of course, this strategy requires exceptional creative capacity, a degree of expertise in the development of strategies and highly local, experienced, pragmatic, responsive and transparent asset management. 

This strategy is not technically novel; it is simply highly relevant in this extraordinary restricted market characterised by an abundance of assets, low rates, poor returns and a low supply. Investors are evidently paying particularly close attention to this approach. That being said, for numerous reasons – notably regulatory, cultural or financial reasons – they do not all want or are not all able to bear the risk of imperfection until it has been corrected. With our expertise, we are even able to identify and support those who can and want to take this approach, wherever they are. Our recent acquisition of the Astro Tower in Brussels is a perfect example.

What is involved in its implementation?

Let us return to the example of the Astro Tower: a very well known – some would say iconic – skyscraper in Brussels, yet obsolete, with a public authority interested in a very long lease; these two factors combined point to an ambitious, complex restructuring project. This is the ongoing project that we have taken on by standing in for the prime contractor in order to see the work through under the best conditions possible. Our concern was in deploying a technical and commercial team that was able to handle the scale of the project and find an investor in Korea, as it happens, who saw in it an opportunity to profit from an attractive risk premium derived from a controlled strategy. 

The acquisition of the Bastide residential portfolio is another example: a strategy of multiple and granular expenses, exposure on often neglected markets allowing for higher returns and an ambitious redevelopment programme. The result for the investor is better absolute performance due to an audacious mixture of cash flows stabilised by the law of large numbers and featuring more capital through the micromanagement of resales.

We have other repositioning, development and acquisition projects in the pipeline that will come to fruition in due course and add more successes to the track record of the short existence of PATRIZIA France.

We aim to develop these alternative strategies by multiplying original initiatives for our clients: division of offices, conversion of offices into accommodation and division of residential properties supported financially by promoters under partnerships. These are just some of the ideas conceived by PATRIZIA France for it to become a key player in the field of asset management!

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