The first open-ended property fund of its kind to invest in the residential sector on a pan-European basis, the European Residential Property Fund will focus on the private rented sector (PRS).
Supported by cornerstone investor Pensioenfonds Metaal en Techniek (PMT) and its fiduciary manager MN. Initial, the fund has received investments in excess of €350 million from eight investors in The Netherlands, Switzerland, and Luxembourg.
With further fund-raising planned, the fund is intended to grow to above €1 billion over the next five years.
ASI said its team will buy existing private rental housing blocks and forward-fund the development of new stock to create a portfolio of good quality, sustainable middle-income residential property.
Whilst PRS is the priority, 25% of the total portfolio can be invested in other types of accommodation such as student housing, retirement and nursing homes. The fund will target high standards of sustainability and will aim to achieve a minimum four star rating by the GRESB Real Estate Assessment, which is the industry measure of green performance.
The fund will be managed by Marc Pamin based in Germany, supported by assistant fund managers Ed Crockett (in the UK) and Ole Tange (in Denmark), and a wider team of managers responsible for transactions, asset management and development.
Together, they have a strong track record in the residential sector and wider European commercial real estate markets. The team have been investing in residential property since 1999 and have €5.2 billion invested or under construction in Europe.
Up to half of the total capital will be deployed in Germany, with the remainder invested across cities in western Europe, including the UK. The fund will target a return of 5-7% (net of fees), with an income element of 3-4% per year. Debt will not exceed 40% (loan to value) at a fund level, with a long term target leverage of 25%.
Aberdeen Standard Investments global co-head of real estate Pertti Vanhanen, said: “The secure long-term rental streams provided by the private rented residential sector are a good opportunity for investors. In Germany approximately 50% of the population rents privately and the sector is an established asset class that saw €16bn of investment in 2017. Denmark, Sweden, The Netherlands, Switzerland and France also have burgeoning rental markets.
“Rapid population growth in European cities means that supply of good quality rented accommodation is in great demand and this is driving a surge in investor appetite. By advance-funding some developments we will help meet that demand while providing accommodation that’s of a decent standard, in locations where people want to live.
“In the UK, the rental sector is already valued at more than £1tn and will grow further, with private renting set to increase by around 24% by 2022. Historically the market has been dominated by individual private landlords, but professional investors and developers are now creating quality housing stock to advance the sector and meet the needs of tenants.
“The time is right for Aberdeen Standard Investments to launch this sort of fund. We now have the residential experience, a broad global real estate outlook, local market knowledge, and boots on the ground in 14 European offices to deliver a residential investment product targeting strong, stable returns.”