In a turbulent climate for the real estate sector, the real estate funds of real estate asset manager CORUM are proving resilient and it is expected that they will achieve annual results before 2023 that are in line with or even better than the set return targets. CORUM indicates that this is due to their opportunistic and disciplined management.
Market leader in fundraising in the first half of 2023
Although the real estate fund market as a whole is experiencing a decline in net capital inflows, CORUM has become the largest management company of the sector in France, with 609 million euros of investments raised in the first half of 2023 (+10% compared to the first half of 2022) (1).
“Although fundraising has never been a performance indicator for us, it has finally become an asset again, at a time when only real estate funds that are able to buy without borrowing can continue to invest,” says Frédéric Puzin, founder of CORUM.
This year it is much more attractive to buy real estate than last year: because real estate prices have fallen, returns have risen and risk-taking is lower in this healthier environment.
CORUM has been able to hold its ground well in a turbulent real estate market
Some real estate funds on the market are currently experiencing difficulties due to the general decline in real estate prices. They have been forced to lower their share prices since the beginning of this year. These announcements were preceded by withdrawals, which have since accelerated, leaving these funds with liquidity issues. CORUM, on the other hand, has been warning for years about the risks that many, especially larger, real estate fund managers take by making unlimited purchases in a very expensive real estate market. The property manager has always tried to adopt a long-term vision and anticipate a decline in the market.
In a period of no or very low interest rates, it was not a question of if but when interest rates would rise again, which without any hesitation caused the current market downturn… Hence the discipline to keep capital inflows under control, through of important restrictive measures imposed over a long period of time on CORUM’s many partners. Hence the opportunistic approach of the manager’s real estate funds. None of the real estate funds offered by CORUM are thematically or geographically limited. This opportunism allows them to find good deals everywhere, regardless of sector. For example, CORUM launched the first European real estate fund, CORUM Origin, followed by the first European real estate fund to invest outside the euro zone, CORUM XL.
CORUM real estate funds continue to buy high-yield real estate
Due to the recovery of the real estate market, CORUM can now benefit from more favorable investment conditions: there is less money in circulation on the real estate market, which means that buyers with cash get an attractive price. This is illustrated by the 15 purchases that the CORUM real estate funds have made so far this year, for a total amount of almost 640 million euros. These purchases involved real estate with a significantly higher initial yield. (2)
Effective return target over 10 years of CORUM Eurion increased from 4.5% to 6.5%
Buying real estate at attractive prices and with such high returns explains why CORUM has the effective return target (3) of real estate fund CORUM Eurion (4) recently increased from 4.5% to 6.5%. This reflects the real estate asset manager’s confidence in the value of its real estate portfolio and its ability to generate future capital gains.
Performance in line with objectives
The return expectations (5) for 2023 are in line with the annual return targets.
The share price increases implemented last year (+4.13% for CORUM Origin, +3.17% for CORUM XL and +5.39% for CORUM Eurion) did not prevent each of the real estate funds from achieving its target . This is a striking achievement, because generally the higher the share price, the lower the return.
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(1) Source: ASPIM, Association française des Sociétés de Placement Immobilier (ASPIM), July 21, 2023.
(2) Initial yield: Return on real estate on the day of purchase, i.e. the annual rent compared to the purchase price of the real estate, including all costs (transfer fees and marketing costs). The return on the buildings at the time of purchase does not take into account the costs of the real estate fund and is not an indication of its annual performance.
(3) Effective return measures the profitability of the investment over a certain period of time. It takes into account the development of the value of the share, the dividend paid out over the period and the subscription and management costs borne by the investor. The effective return over 10 years is 7.06% for CORUM Origin, 10% for CORUM XL and 6.5% for CORUM Eurion.
(4) CORUM Eurion is currently only available to institutional investors in the Netherlands.
(5) Return: the gross dividend, before French and foreign taxes (paid by the fund on behalf of the shareholder), distributed over year N (including the extraordinary interim dividend and the portion distributed as capital gain, which i.e. 0.94% for CORUM Origin and 0.12% for CORUM XL in 2022), divided by the purchase price of the share on January 1 of the year N. This indicator allows the annual financial performance to be measured. In 2022, the return of CORUM Origin was 6.88%, CORUM XL 5.97% and CORUM Eurion 6.47%.