L’Etoile ready to mend assets for new ‘broken core’ fund

Investment manager L’Etoile Properties, which is part of Sienna Investment Managers, has been given the go-ahead by Germany’s financial supervisory authority BaFin for its new European real estate fund. The EP Sienna IM European Broken Core Office Fund has had its first close, raising €115 million.

An open-ended German special fund, it will focus on office properties in established locations in Germany, France, Spain and the Netherlands, concentrating on core assets which have minor shortcomings, including low vacancy rates, short weighted average lease terms or manageable technical problems. 

The term “broken core” was devised by L’Etoile and describes buildings for which active asset management, revitalisation and repositioning will increase the value for investors. L’Etoile said it is a sub category of core-plus investments but with lower risk than say manage-to-core..

Slight defects can make for interesting opportunities

L’Etoile said that the current uncertainty regarding the future viability of office use results in interesting purchase opportunities, especially for properties that have slight defects in rent or building quality, but which can attract strong demand and high-credit tenants due to their location.

The fund is to be managed by Britta Slater, managing director of newly founded business unit L’Etoile Properties Funds, which is headquartered in Frankfurt and headed by Richard Apfelbacher as senior managing partner. Samy Bchir will take over the group chief investment officer position at L’Etoile.

Slater was previously with the Evangelische Zusatzversorgungskasse [Evangelical supplementary pension fund] where she had been a portfolio manager for more than three years. Before that, she was director of fund operations at AEW Ciloger SAS and was Associate Director at AEW Europe in Luxembourg.

“The EP Sienna IM European Broken Core Office Fund is specifically designed to address the needs of German institutional investors who have slightly higher return requirements but do not wish to take significant risks,” said Didier Unglik, president of L’Etoile Properties. “With this fund, we are hitting the right nerve with investors – as evidenced by the fact that we had our first closing at €115 million shortly after the coronavirus measures were relaxed and investment activity increased again.”