France’s ERAFP goes to market for real estate mandates

A large slug of the assets will be in intermediate housing at below market rate.

ERAFP, France’s public service additional pension scheme (ERAFP), a 100% SRI investor with €27bn in assets, has gone out to tender for three new real estate asset management mandates incorporating a significant allocation to intermediate housing as part of an expansion of its property investment strategy initiated five years ago by its board. The fund will hire three new property managers – two of them for standby mandates – to build up a portfolio worth an initial, indicative €200m in the first three years to be invested in residential real estate assets in France. The fund said the value of the mandates could subsequently be revised upwards or downwards.
The mandates stipulate that the managers hired will invest a substantial portion of the assets in intermediate housing, while seeking to maximise returns. Intermediate housing means houses that are sold and rented at a cost above social rent, but below market levels.
ERAFP said funds not invested in intermediate housing should be directed towards private housing and alternative sectors, in particular senior and student housing.
Additionally, the fund managers will be responsible for making it easier for French civil servants to rent properties as part of the property letting process.
ERAFP was recently authorised by its board to increase the percentage of its portfolio invested in real estate assets from 10% to 12.5%.The initial duration of the new mandates will be ten years and the fund will have the option to renew the contract for a further two years. The investments must be made from a long-term perspective and comply with the institution’s SRI framework, which is based on five values: respect for the rule of law and human rights; social progress; social democracy; environment; and standards of governance and transparency.
The tender file is available on the website and the deadline for the submission of proposals is 12 June 2017 at 12 noon (Paris time).
In 2013, ERAFP hired AXA Real Estate Investments Managers for a ten-year property mandate worth up to €350m. CBRE Global Investors France and LaSalle Investment Management were appointed as stand-by managers for the mandate. AXA’s brief was to manage a portfolio of unlisted real estate assets located in OECD countries in Europe.
In March 2013, the fund also awarded a 10-year contract to AEW Europe SGP for a €310m real estate mandate running an unlisted property portfolio in France including investment in offices and retail premises, housing and student accommodation.
Link to ERAFP real estate coverage