City-focused fund strategy reaping rewards for TH Real Estate

The London-based investment manager has so far raised around €1bn and deployed €940m on behalf of its €5bn European Cities Fund.

TH Real Estate has collected an extra €422 million of equity from five institutional investors for its latest European property fund, saying the vehicle “resonated” with investors because its city-focused approach looked beyond short-term cycles.

The London-based investment manager, owned by US investor TIAA, launched the open-ended, core European Cities Fund in March last year with a target of at least €5 billion.

In a change from its previous European funds, however, the firm focused ECF’s investment strategy on a list of 200 “future-proof” cities rather than nations.

Andrew Rich, manager of ECF, said the firm’s strategy appealed to investors because it was had a longer term outlook and delivered long-term growth and income.

“This additional equity is testament to investors’ confidence in both the fund’s city-focused strategy and our ability to successfully deploy the capital,” added Rich.

Rich: ECF’s strategy “resonated” with investors

Following the latest fundraise, ECF has amassed around €1 billion from institutional investors in Germany, the Netherlands, Ireland, the US and Australia. In July, TH Real Estate held a first close for the fund, which is targeting a 5 percent net return, after collecting around €500 million from investors within three months of its launch.

To date, TH Real Estate has acquired around €940 million worth of assets, including Helsinki’s premier shopping center, Kamppi; the Xanadu Shopping Centre in Madrid; The Omni Centre in Edinburgh; Meraville Retail Park in Bologna; and The Cube office building in Berlin.

Xanadu Shopping Centre

The firm reasoned that challenging market conditions and evolving investor requirements meant it was increasingly looking at ‘mega-trends’ – longer-term drivers of real estate performance that are having a major impact on the built environment and will have significant implications on demand for global real estate. These mega-trends include urbanization, rising middle classes ageing population, technology and the shift of economic power away from the West.

“As we have explored these mega-trends, it has become apparent that their impact will be much more notable, for better or worse, at city level, as opposed to nationally,” TH Real Estate said in a fund document. “Therefore, our global strategic advice is now centered on cities, not countries. This means that compelling opportunities do not get missed due to negative country-wide perceptions, and vice versa.”

The result was a list of 200 future-proof cities, positioned to grow in value over the long-term, which it ranked according to a proprietary scoring system using ‘soft’ metrics such as quality of life and technology, ‘hard’ factors like youth population and urbanization and ‘growth’ data such as discretionary spending and population growth.