Royal-Hamilius, Belval Plaza as well as the Place de l’étoile: Firce Capital, the asset manager of institutional investors such as the sovereign funds of Abu Dhabi Adia and Amundi, has a series of major pieces in its portfolio. It is worth €2 billion in assets with a surface area of 400,000m2. Delano’s sister publication Paperjam met with its managing director Romain Muller and president Christophe Fournage. 

How is Firce Capital Fund doing at the moment? 

Romain Muller:  Okay. We’re in the middle of the launch. On March 1, the first steps were taken to launch a call for tenders with all the partners of the fund. Today, we are in the final stages of being able to market the fund to the type of investors we had planned from the beginning. 

Who are these investors? 

Christophe Fournage: The investors we are looking for are qualified, professionally or institutionally. We are not going to retail to individuals. We are looking for people who know the Luxembourg market. These can be private banks, institutional banks, insurers, pension funds or family offices that have great liquidity but not always the human or material means to directly invest in real estate. 

Is the real estate investment strategy working for you in the current environment? 

C.F.: I think so, at least that’s what we hope. The reality is that today, we have a market where real estate is probably one of the few investment segments where people feel reassured about both capital preservation and value creation. There are a lot of concerns among both actors and individuals. In all euro area countries, the amount of savings of European residents has only increased, even in the countries of the south. It is clear that there is concern about the future, and the growing level of government debt is not exactly reassuring people. They wonder what will be left tomorrow. And one thing that will certainly not disappear is land. 

Have the changes brought about by the covid crisis pushed you to adapt your strategy by, for example, moving away from trade and more towards real estate? 

R.M.: The initial strategy has been maintained, namely the two compartments being launched at the same time. There is one sub-fund invested 100% in Luxembourg real estate, and then the second sub-fund invested 70% in Luxembourg--all asset classes combined--and 30% in Europe, to be able to provide a slightly higher return. 

C.F.: By choosing countries in Europe that allow slightly higher returns--because of their positioning or history--that the heart of the Luxembourg market, which, because it is AAA and it is a healthy country, has a stronger demand than supply, and therefore higher yields. 

Let’s talk about your investments in Luxembourg. What’s the status of the Royal-Hamilius project? 

C.F.: We have just received the commercial part. A little earlier we had already received the [part with] offices and parking. We do not have the residential part. The offices are fully rented, the parking is operated by Apcoa. The retail part, today is, I would say, generally well-praised, since we already have the Galeries Lafayette, Fnac, Delhaize and the upcoming opening of Decathlon. Together with Codic we are in the process of commercialising the last remaining small surfaces for rent. It was delayed for a number of reasons, including covid, and the delays at the construction site. As a result we still have a few empty spaces on rue Aldringen, but in the long run, everything will be-–I hope--rented out without too much difficulty. 

R.M.:  We hope to find tenants for most of the available spaces by early 2021. At the moment, we are already in discussions with a few brands. I think that by mid-January, at the latest by the end of January, we will have some new announcements to make on rentals that are currently in discussions. Today, we are very positive, and we see this with confidence.

We recently heard about the departure of Manko, which was supposed to occupy 700m2 dedicated to food service. Do you have plans to find one or more other occupants? 

C.F. Covid is not without consequences. Many businesses are dead. It’s not just this specific restaurant that’s in crisis. For the sky restaurant, we now have three or four really interested brands with whom we are in discussions. We should be set for the end of the year.

R.M.: The momentum was bad for Manko. It was just that.

Next to the Royal-Hamilius, which positions itself as rather high-end, you also list Belval Plaza in your portfolio, with a completely different commercial offer…

C.F.: They are two different approaches, but mostly two different customer groups and two different locations. You have high-end retail downtown which is the Royal-Hamilius, and you have retail that is more about repositioning in Belval. For Royal-Hamilius, you have to find the right tenants and turn them into a well-leased and risk-free ‘core’ asset. In Belval, we will rather look for the transformation of the shopping centre.

What is this transformation?

C.F. The Belval shopping centre arrived too early. So you have a mall that was born half dead because the clientele wasn’t there yet. Now, 12 years later, we see that the university is there, the station, the offices, the housing is there. You have a whole bunch of buildings under construction. All of that helps to increase the flow, so that today—I think a lot of people don’t know this—Belval is the largest shopping mall in the country. We are approaching 7 million visitors for the year 2019 ahead of the Belle Étoile, the Kirchberg, the Grand-Rue and the avenue de la Gare.

R.M.: At first, Belval had trouble attracting developers. Today, there are competitions amongst promoters. I think Belval has proven itself, and we are now in a different dynamic.

C.F.:  The previous owners had a logic of filling rather than merchandising. Here, the commuter flow of the station is very important. In France, the first two shopping centres--La Défense and Saint-Lazare--are [that way]. In the French classification, it is necessary to take the third shopping centre to find a residential zone. We believe that today, our mission and our objective is to adapt the offer to capture the commuter flow and allow the repositioning of the shopping centre. When this acquisition was announced, the businesses people asked for were a pharmacy, a drugstore, a bookstore and a food shop. Everything we need on a pendulum flow is missing.

Do you have a timeline for Belval?

C.F. We hope to have completed the main parts of the transformation by the end of 2021.

And regarding the Place de l'Étoile, the city of Luxembourg presented its new PAP [special development plan] last summer…

C.F.: We are waiting for this part of the puzzle to start. Today, there is a team working on this project whose mission is to develop a product different from what it was originally, since it was originally a shopping centre. I think the city must be delighted to see that there is not going to be a product that will cannibalise downtown Luxembourg and move closer to a more residential project with a few offices and services. I think this is a development that is desirable and good for Luxembourg City.

In your opinion, will the return be better with more housing, even if 10% will be at affordable prices? 

C.F.: There is no debate. Today, if we had come up with another shopping centre, it would be a lose-lose: we would reduce the capacity of downtown businesses and we would shoot ourselves in the foot. So the Chapman PAP is not a good PAP today, given the configuration of shops downtown. When the Chapman PAP was made, the Royal-Hamilius did not exist, and the density of shops in Luxembourg was much lower. Today, adding some accommodation and a few offices makes a lot more sense, especially since we have the tram that comes from Kirchberg and that will go back towards Mamer.

You also have the Amplexor building in Bertrange in your portfolio. The idea is to demolish that office building in order to construct apartments, right?

R.M.: The idea is to build a little more on the day we are no longer in the Seveso zone (even if we are at the borders of the Seveso zone). The building is part of this graphic charter of the municipality. It is an 'asset' that was bought with a very long-term vision, but it works very well in the short term too since it is relatively simple as a building: it has a lot of car parks, it has direct access to the station, and it is a very easy building to divide. We just signed a long-term lease with Securitas, which took a floor to move there.

C.F.: It is a super yield asset with good value creation potential in the medium- and long-term. As Luxembourg City is in short supply of housing, the surrounding cities are seeing a surge in demand. And Amplexor is in an area where it makes a lot of sense, in the medium-term, to develop residential infrastructures: there is the accessibility of public transport, the proximity of the city center and two major shopping centres.

What are your future projects in Luxembourg?

C.F.: Firce Capital is looking for further acquisitions in Luxembourg. We are active in both housing and office. 

What about commerce?

C.F.: Today, we have not identified an opportunity to work in trade and commerce because we are very selective. Trade is probably one of the best things to invest in, because we are at the bottom of the cycle, and trade in general is made up of very intelligent people who will be able to adapt very well to the crisis they are going through. Real estate is made up of cycles, and it is better to invest when cycles are low than when they are high.

This article was originally published in French on Paperjam.lu and translated and edited for Delano.