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Fund managers breathe life back into European real asset deals in Q3

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Fund managers breathe life back into European real asset deals in Q3

Asset managers made fewer real asset acquisitions year over year in Europe in the third quarter, but deal activity increased from the lows of the second quarter due to the COVID-19 pandemic.

The volume of real asset acquisitions made by listed and unlisted European asset managers dropped 11.3% to 267 deals during the third quarter, compared to 301 transactions during the same period in 2019, according to S&P Global Market Intelligence data.

Announced transaction value plummeted 40.9% to €10.69 billion year over year from €18.07 billion in the 2019 third quarter, but the figures soared 61.2% compared to the second quarter's €4.15 billion across 180 announced deals.

U.K. private fund managers were ready to invest in real estate at the beginning of the quarter once clarity around valuations emerged, according to market experts. The investors were poised to target areas "where there is some distress and where they'll be able to relieve that distress, whether it's with providing loans or by way of some sort of equity participation," said Adrian Levy, partner and co-head of real estate at law firm Clifford Chance LLP.

For private equity firms, real asset deal activity dropped year over year in Europe but leapt 98.1% compared to the second quarter. The number of deals in the third quarter fell 14.5% to 47 deals, compared to 55 transactions during the same period in 2019, according to S&P Global Market Intelligence data.

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Private equity fund managers have increasingly focused on European real assets in recent years, with infrastructure assets topping their buy lists. A total of 116 real asset acquisitions have been made by private equity firms as of Oct. 26, with an aggregate transaction value of €7.07 billion. The energy and utilities sector attracted the most capital during the quarter, with France-based Antin Infrastructure Partners raising the most capital at €6.5 billion for its Antin Infrastructure Partners IV fund.

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Deal activity in the renewable energy sector almost returned to the pre-pandemic levels in the quarter globally, according to a Preqin report. Conventional energy deals, however, were down 44%, highlighting the growing influence of ESG commitments. Preqin termed renewable energy a key driver of infrastructure investment.

Cerberus Capital Management LP made the biggest private equity real estate deal in Europe in 2020 as of Sept. 30, with the acquisition of the real estate business of Banco Bilbao Vizcaya Argentaria SA for €2.80 billion. Other large deals struck over the year include KKR & Co. Inc.'s acquisition of the secondary network of Telecom Italia SpA for €1.80 billion, and EQT Partners AB's acquisition of Chr. Hansen Holding A/S' natural colors business for €800 million.