We talk to a Germany-based property and infrastructure investment business that has developed a private wealth management channel. It says it harnesses modern tech to capture opportunities, while also leveraging four decades of on-the-ground experience.

In this tech-driven age, there’s an appetite for using data-crunching tools to sift through a vast trove of potential investment opportunities. Nevertheless, business savvy still counts in the end.

Such a stance – blending data and hard-won experience – seems to be the formula for Patrizia SE, a Germany-based independent real assets firm founded in 1984, a time when Germany was still split into east and western nations before the fall of the Berlin Wall. Fast-forward to the noughties, it became a listed firm in 2006 and launched a private investor business in 2016.

Patrizia, based in Augsburg, Bavaria, has about €60 billion ($70.1 billion) of AuM, of which around €50 billion is in real estate. The firm is present in 26 cities globally, of which 17 are in Europe.

That private investor arm is in tune with a desire in the wealth management community to plug into the returns available from real estate and infrastructure. And with infrastructure becoming a hot asset, made even more so by Germany and Europe ratcheting up defence and other public spending, the winds seem set fair.

Sebastian Baer, head of wealth solutions at Patrizia SE, is certainly optimistic about these asset classes. Baer brings experience in the banking side – he worked in the private wealth area at UBS until 2017. Subsequently, he moved to a smaller Swiss private bank before joining Patrizia five years ago.

A 40-year track record of working in the real assets space is hard to replicate, and an important part of what the firm brings to the party, Baer said. 

It has expertise in living and logistics real estate, for example. Its understanding of specific markets and local conditions, coupled with the use of tech tools (AI, etc) means that it can trawl for opportunities in a data-driven way, as well as using qualitative judgement.

“We also walk these streets as well,” Baer said.

The firm is applying this mix of a data-driven approach and local knowledge to all its real assets investments.

“We know many of our peers and investors and those who want to sell,” Baer said.

Technology has been shaping property investment for some time, as the use of web search tools to locate properties for sale shows. Now that artificial intelligence is developing, an AI use case is analysing and sorting through real estate investment opportunities.

A report by Morgan Stanley on 2 July said that AI, from digital receptionists to hyperlocal valuation models, will be "paving the way for $34 billion in efficiency gains by 2030." 

In a 17 September report, CBRE wrote: "Generative AI could provide a new opportunity for real estate investment managers to bridge the technology gap that currently exists between them and those investing in traditional asset classes such as equities and bonds. There are hurdles to be surmounted, CBRE noted: "One of the key issues faced by real estate companies is the unstructured labyrinth of real estate data. Often, within larger real estate firms, each team will collect, maintain and store their own data in different files and formats. Generative AI has the capability to collate and interrogate large vacuums of unstructured data which could help real estate professionals and the industry to use it for broader use and with greater impact. Generative AI can also search and process documents such as leases for crucial datapoints, values or dates which could improve, or at least maximise the use of the data available for businesses, without requiring time-consuming manual data collection. Better data visibility and quality enabled by these methods should help to optimise and speed up positioning analyses for real estate portfolios."

Empty units
Finding out opportunities requires experience, Baer said. To give an example of the kind of knowledge Patrizia draws on, it knows that there are lots of empty housing units because there is a shortage of refurbishment money to cope with sustainability/energy rating requirements. The firm can use its awareness of these factors to make an informed investment decision.

“It is like truffle sniffing – you need to be in the market,” Baer said. 

Real estate, and infrastructure, are in vogue. A survey issued this week by Ocorian, based on the views of 200 figures in the family offices space, found that 64 per cent expect to raise infrastructure exposure by 25 per cent to 50 per cent over the next two years. (Ocorian provides specialist services to financial institutions, asset managers, corporates, and HNW individuals.)

Infrastructure is in vogue – big firms such as BlackRock have pushed into the sector; to give another example, in late 2023, Middle East alternative investment firm Investcorp bought a 50 per cent stake in the $4.8 billion infrastructure business of US firm Corsair Capital. For years, Australia's Macquarie has been a big player in the space. As for real estate, bricks-and-mortar assets remain a key portfolio holding, not least because they are an established asset class which is more easy for end investors to understand than racy new technologies.

Too big for their own good?
Baer argued that the largest investment houses have big brand name recognition and successfully draw in heavy inflows increasingly from private wealth. Several of them have substantial dry powder (unused capital that has been committed to them) and tend to prefer large-cap investments, as they have limited selection capabilities and deployment processes required to invest in mid-market opportunities where true innovation lies. 

“Innovation is not happening when one large private markets fund is buying a port or airport from another private equity fund, sometimes part of the same group,” he continued. 

“As an industry we need to find ways where the largest investment houses co-operate and co-originate with sizeable mid-tier players such as us to make transition and innovation happen,” Baer continued.

“We need to focus on innovation in real assets investing …it is not just about buying the market.”

Patrizia concentrates on various “transition themes,” relating to digital, energy, urban and living change.

Funds and structures
Patrizia offers its capabilities in real estate and infrastructure investing and related services including asset allocation via funds (closed-ended, open-end; semi-liquid ELTIF and UCITS; tokenised). Sectors include living, logistics and offices. Investment is executed via equity and debt allocations. 

Part of the appeal of his firm, Baer said, is that Patrizia has been “scrutinised by the largest and most sophisticated investors in the world.”

Evergreen
Patrizia is following suit by using “evergreen” – aka perpetual – fund structures as a way of offering a channel to these markets.

“Our new evergreen infrastructure ELTIF ('Patrizia Infrastructure Invest’) offers a diversified allocation to innovative mid-market infrastructure investments with ‘private markets compatible’ liquidity features. This is being achieved via equity and debt investments combined with a dynamic asset allocation overlay,” Baer said. 

Baer said the firm prefers not to onboard end investors, instead it works with advisors, wealth managers, private banks, multi-family offices and distribution platforms.

Patrizia is also considering a real estate European Long-Term Investment Fund, which is a regulated investment fund giving access to private markets, and tokenized solutions, Baer added.