EQT Real Estate, the London-based real estate arm of Nordic private equity giant EQT, has closed its debut property fund, also called EQT Real Estate, after collecting €420 million.
The firm, which launched its real estate business in 2015, said it had garnered capital from a variety of sources including institutional investors, such as pension funds and insurance companies, in Europe, the US and South America as well as family offices in the Middle East. It is understood that Keva, the Finnish pension fund, and Morgan Stanley Alternative Investment Partner, the fundraising arm of Morgan Stanley Investment Management, were two of the fund's investors.
EQT launched the closed-ended opportunistic vehicle in 2016 with an original €500 million target. The fund’s life span is eight to ten years and, at the time of announcing the first closing, the firm said its target IRR was in the 16 percent to 20 percent range. At present, it is understood that the fund is performing to its returns expectation.
Despite coming up short on its target, Edouard Fernandez and Rob Rackind, partners and real estate co-heads at EQT, said the firm had achieved its fundraise over 12 months when most firms were in the market for 18 months.
“We are very happy with the amount raised and think we are very fortunate. Where we are in the cycle, rental growth is going to be the main driver of values as opposed to market-led yield compression. Over the last three years it has really been the weight of money driving down yields that has created value,” said Fernandez.
“Most investors see that, going forward over the next few years, they are going to have a hands-on value creation approach, which is exactly what we have as a team and why we were able to raise the amount of money that we were able to raise, combining our team’s experience with the EQT platform and the depth of penetration it has in the local markets,” added Fernandez
“An interesting dynamic in the market is that investors that are prepared to invest in to real estate funds are looking to put more money into larger funds with fewer fund managers. Although a lot of capital has been allocated to real estate, it has been through predominantly existing managers with existing relationships,” said Rackind. “So we had to break that mould and thanks to the EQT pedigree, combined with the team’s track record and skill set, we were able to use those relationships to target that capital for our fund,” added Rackind.
EQT said it had also made its first foray into both the Nordics and the residential sectors with its most recent purchase on behalf of the fund. The firm said it had acquired a site in a well-positioned submarket in Stockholm for a new-build 148-unit development with a local partner, Tobin Properties. The price for the residential site and project was not disclosed.
The Nordics deal represents the fourth acquisition for the firm on behalf of the fund.
In September, EQT acquired an office park in Cologne for €188 million. While in July, it also acquired two Parisian office assets for €51 million and €33 million respectively. It is understood that future outlays are expected in other major German cities such as Munich, Berlin, Hamburg, Frankfurt and Dusseldorf.
Over the last 18 months, it has also been growing out its team, adding seven executives to bring its real estate division up to 13 professionals.