Mining past experience and adapting to current trends to guide the path forward
Q&A with PATRIZIA Head of Investment Division, James Muir
Here, we speak to PATRIZIA Head of Investment Division James Muir, who explains PATRIZIA's investment set-up, its current value creation play and its approach towards driving forward the digital transition.
Been there, done that, got the T-shirt. This colloquial phrase refers to the deep knowledge accrued by someone on a particular topic.
And, in many ways, in the world of real assets investing, the phrase could be applied to PATRIZIA.
Over its 41 years, it has invested across the wide spectrum of the sector, entered many different markets and drawn upon a multitude of strategies to provide returns for its clients.
In this time, the investment manager has also found value through global financial crises and a whole host of economic cycles.
Along the way, PATRIZIA has had to evolve and adapt to craft the right strategies for the right periods of time.
With the current investment cycle on the horizon last year, PATRIZIA focused its investment strategy on matching its investment skills with opportunities related to the DUEL megatrends (digital, urban, energy and living transitions) it has identified.
Personnel-wise, the company’s decision-making team was streamlined from 11 down to six and now five:
CEO Asoka Wöhrmann, Head of Investment Division James Muir, Head of Client Division Konrad Finkenzeller, CFO Martin Praum and Founder Wolfgang Egger.
The streamlining at the top of the firm has been mirrored in the Investment Division with the previously separate real estate and infrastructure functions being merged into holistic real assets Fund Management and Investment Management teams.
James Muir oversaw the reorganisation of the Investment Division and here, we ask him about the new set-up, PATRIZIA’s current value creation thesis and how the company is approaching the digital transition.
James Muir,
Head of Investment Division
estatements: How would you describe PATRIZIA to someone who hasn’t heard of the company?
James Muir: PATRIZIA manages an incredible global real assets portfolio, which is very well positioned along the DUEL megatrends with investments spanning data centres on the digital side of things through to living assets located around Europe, Asia and North America.
The firm has the capabilities to invest in platforms, portfolios and single assets, and we utilise a combination of in-house expertise and best-in-class partners to invest and grow companies, develop new assets and improve existing assets and portfolios.
estatements: The sector we operate in is aligned with different investment cycles and vulnerable to the vagaries of long-term and short-term geopolitical and macroeconomic shocks. How does PATRIZIA adapt to these market trends?
James Muir: We invest across the risk spectrum of core, core plus, value add and opportunistic, and invest in both equity and debt. This agility allows us to invest where the most compelling opportunities can be found and means we deliver returns across the investment spectrum.
PATRIZIA therefore has the breadth of offering to adapt to the current cycle and go where the market is.
estatements: By referencing ‘we’, you are of course referring to the people – the PATRIZIAns. What characterises your colleagues and the culture at PATRIZIA?
James Muir: When I look at the set-up of the Investment Division, it’s clear that we have the right skills and expertise to be successful. PATRIZIA has always been independent and entrepreneurial, but we are also systematic and efficient. We learn from our existing investments and transfer knowledge across our portfolio. This knowledge and know-how can give us an edge when identifying and executing new investment opportunities.
Our teams are adaptable and our investment professionals can transfer skills based on where the opportunities are. Colleagues are able to glean data knowledge and best practices from what they are seeing across our c. EUR 60 billion real assets portfolio.
Market insights, both from local teams and our data intelligence team gleaned from our portfolio, are essential to what we do. We have that knowledge and know-how and we use that to inform our future activity which gives us a huge edge in the market.
estatements: You’ve referred to the company’s adaptability to achieve the best outcomes at the right time. What is the current value creation play?
James Muir: In the world in transition we currently live in, our investment strategy is inextricably linked to four megatrends: the digital transition, urban transition, energy transition and living transition – what we at PATRIZIA refer to as the DUEL megatrends.
Our portfolio is nicely aligned to the DUEL megatrends. The urban transition, for example, takes into account the way people live, the way people want offices and the way that we identify strong logistics locations. It’s all connected and this investment lens ensures we are invested in assets that meet the needs of communities and society for years to come. This future focus ensures that DUEL megatrend investments generate returns.
estatements: Can you give me an example of DUEL megatrend which demonstrates its effectiveness and the broad range of the PATRIZIA platform?
James Muir: Sure. I’ll go with the living sector.
Our living value-add track record in Europe and North America is around 20% IRR.
We have excellent capabilities in real estate private equity where we buy a business or a platform and the historic return is around 20% IRR.
We also buy portfolios and manage developments either steered in-house or by operating partners, we invest into affordable housing and we carry out refurbishments. Across this range of investment and development activity in the living sector, the returns come out at around 20%.
Our heritage is in residential, it’s what we are known for, but, more broadly than that, because I could have chosen other sectors or strategies, it demonstrates that if you give PATRIZIA capital, we can generate good returns.