With the recent launch of Redevco Living, some eight months after rolling out a significant hospitality strategy, Amsterdam-headquartered investment management firm Redevco has firmly flagged its interest in the investment potential of beds.
As with many investors, it’s a sign of the times. Yet few real estate firms illustrate the shift in investor appetites and secular trends as neatly as this European urban regeneration specialist, which was born two decades ago as a spin off from retailer C&A, with a mandate to manage its store portfolio across Europe.
At the start of June, the firm unveiled Redevco Living, a residential development, investment, and operational platform, accelerated by the acquisition of Life Europe, a Dutch residential real estate specialist. Shortly after, news broke of a joint venture with Rotterdam’s Red Company to develop a 159-metre-high residential tower in the Dutch port city. Said Herman Jan Faber, head of business development at Redevco: “We believe that cities should make a positive contribution to the health & wellbeing of both people and planet. One of the areas in which we can help make that happen is through building sustainable, high-quality homes.”
The firm’s significant expansion into beds completes a two-decade-long odyssey away from being a pure retail real estate specialist, into a firm focused on evolving opportunities in cities, curious about all aspects of sustainability, and how post-pandemic lifestyle choices affect real estate. With fresh ambitions in the hotel and residential space, Redevco is shifting its focus from street level to the upper stories.
Market dislocations
While its historic roots lie in the rag trade, namely a family textile business that launched in 1841 in the Netherlands, later becoming the C&A empire, the formation of Redevco in 1999 was already a sign of retail market dislocations. Redevco was created out of an in-house department that managed a portfolio of increasingly unwieldy owned assets for the group, with a mandate to extract value. C&A was losing its supremacy in European retail, and less than a year later, the Redevco business unit re-let 109 UK C&A stores comprising some 500,000 sq m of space. The majority of the UK portfolio was re-let within six months to major brands: Next, H&M, GAP, Primark, New Look and Wilkinson. Rental levels of the big UK stores were the highest in the portfolio, and in less than two years C&A’s share of Redevco’s tenant roll dropped to below 50 per cent from 97 per cent in 1999.
In 2001, Redevco acquired a Belgian retail real estate portfolio for €1.2 billion from GIB Immo, predominantly comprising retail parks. This retained portfolio is still considered one of the firm’s highest performing segments, but the years that followed, in the wake of the Global Financial Crisis and throughout the rise of e-commerce, convinced Redevco that the future lay beyond pure retail.
Redevco entered the residential sector at the end of 2018 targeting growth in Germany, the Netherlands, Spain and the UK. Dutch acquisitions followed, in the shape of development projects in Amstelveen and Delft, with further deals in Oxford in the UK and Dusseldorf in Germany. The firm also launched a build-to-rent (BTR) strategy in the UK market together with Swiss Finance Property.
Hospitality strategy
Finally, towards the end of 2022, after some prior experimentation with hotels as individual elements in mixed-use projects, the firm unveiled a more ambitious hospitality strategy. Redevco’s ‘Next Gen Stays’ joint venture platform would aim to capitalise on the post-pandemic resurgence and growth in the youth tourism and experience travel market, through aggregating a professionally managed portfolio in the sector. The firm acquired six assets across Spain and Portugal for over €80 million in Lisbon, Bilbao, Seville, Porto, and Malaga to this end.
Said Israel Casanova, managing director of global transaction management at Redevco, at time of launch: “The vast online ‘sharing economy’ market that Airbnb identified and opened-up is now professionalising in a more community-focused way.
“Our Next Gen Stays hotels form a distinct market sub-segment to target the younger, tech savvy and sustainable travellers that are increasingly seeking out authentic, high quality yet affordable experiences.”
The Next Gen Stays investment strategy is targeting a net levered IRR of 15 per cent + over a five-year period. For Redevco, that pivots around acquiring “strategically located under-exploited real estate with local character and redevelopment potential”. The assets are being pre-leased to a professional operator prior to being redeveloped into sustainable, value accommodation.
The intention is to initially build a €250 million portfolio in the Iberian markets with an unnamed partner, before expanding into a pan-European hotel vehicle with a target €500 to €700 million investment volume. The completed, refurbished hotels will be compatible with Redevco’s mission of making its entire real estate portfolio net carbon neutral by 2040.
Mixed-use components
For Marrit Laning, chief strategy and innovation officer, the strategy is coherent with the firm’s core purpose. “A brand-new building might be more sustainable in one sense, but we believe in a second life for standing stock,” she said. Redevco’s other plans for vacant buildings include “redefining what mixed-use looks like” as evidenced by its ambitious schemes in Lille, Bordeaux and Rotterdam. “Le 31, our scheme in Lille represents a real collaboration between the community and its tenants. The mixed-use aspects also mean that a variety of people visit the asset; they wander around it and really utilise all its functions. We’d like to replicate that elsewhere.”
Overall, Redevco sees the shifting use-cases for buildings in urban areas as an exciting opportunity. “We should treat those buildings as a blank canvas. We can think all over again about what people want and how we can utilise these buildings in the best way both from a use and sustainability standpoint.”
Redevco is further building on its hospitality credentials in Hamburg, Germany, where the firm already launched a high-profile net carbon zero mixed use scheme comprising a hotel, retail and F&B.
The firm will now develop a dual-branded hotel site, hosting the Hyatt Centric Monckebergstrasse hotel plus an extended stay concept, Stay Kooook Monckebergstrasse. The former will be an 185-key boutique hotel, while the latter will provide a further 85 rooms. Both properties are expected to launch in the first quarter of 2025.