EG launches debut sustainable RE fund – Exclusive

The Sydney-based manager is targeting A$250 million (€161 million; $181 million) to deploy in office buildings in need of energy efficiency improvements.

EG Funds Management, a Sydney-based real estate fund manager, has brought to market a sustainable real estate fund targeting A$250 million (€161 million; $181 million) in equity.

PERE has learnt that the firm has launched High Income Sustainable Office Trust, with sustainability as the core investment thesis. The capital raised via the blind-pool vehicle, with a term of nine years, will be deployed in low energy-rated office buildings across Australia following which the firm would undertake value-add and refurbishment to improve their energy efficiency.

Australian Clean Energy Finance Corporation (CEFC), a government-owned agency, is an anchor investor in the fund with an equity investment of A$125 million, according to the marketing documents of the fund obtained by PERE. In total the firm is expecting to raise the target sum from a maximum of five investors. EG Funds Management declined to comment on fundraising when approached by PERE.

The National Australian Built Environment Rating System (NABERS) is a national voluntary rating system that measures the environmental performance of Australian buildings, tenancies and homes. The NABERS rating takes into account factors such as the building’s energy efficiency, water usage, waste management and indoor environment quality. Close to 80 percent of office buildings coming up for lease renewal in the country in the coming five years have a NABERS ratings of less than 4.5 stars, according to information in the marketing document.

EG Funds Management would be investing the fund corpus in commercial properties with a NABERS rating of less than 4.5 stars and a WALE of less than five years, and then seek to secure lease renewal and improve the NABERS rating to 4.5. Net IRRs of around 12 percent are being targeted from the investments.

EG Funds Management was established in 2000 and has three divisions, namely funds management, advisory and property development. The firm is currently also raising capital for Yield Plus Infrastructure Fund II, its second Australian value-add private equity real estate fund with a fundraising target of between A$350 and A$400 million.