It is an interesting time for ING Real Estate Investment Management’s European Property Strategy (EPS), a first-of-a-kind investment initiative that facilitates unit sales from its suite of European funds. Most fund investors have ridden the value elevator down and have decided to wait until it starts to rise again, hence discount opportunities in core or core-plus funds are difficult to find Will Rowson, ING REIM You might ask why we initiated this vehicle. The reason is to diversify our investor base. It gives a portal through a regulated channel that we didn’t have before. It has allowed us to attract new equity from different sources Will Rowson, ING REIM
The initiative was launched exactly one year ago on the premise that new investors could access the Hague-headquartered firm’s €17 billion Continental European real estate fund portfolio via a single, regulated vehicle while concurrently enabling existing investors to exit should they require the liquidity. The open-ended vehicle has attracted more than €165 million in commitments to date – testament to its popularity with a host of new investors.
Whether at a discount or a premium, ING REIM units are trading within its ring-fenced secondaries market. Reveals Tjeerd Jansen, EPS’ portfolio manager: “Today, we have equity of €130 million within EPS, €80 million of which is invested and the rest is already committed for investment.”
Last month, ING REIM had five investors buying units – investments into EPS are made on a quarterly basis – and Jansen is confident any further participants also can be paired with willing sellers, despite ING’s limited universe. “I have focused scope because I am only looking at ING funds, but I’m seeing the secondary market is more liquid than it seemed before,” he says.
A typical EPS trade involves new investors and existing ING unit holders lodging their buy or sell requirements with ING Real Estate Regulated Fund Management (RFM), the platform responsible for the service. To ensure against a conflict of interest, ING mandates PricewaterhouseCoopers to facilitate the actual trade, supplying the global professional services firm with the appropriate transaction information. On an occasion there are multiple willing sellers, a reverse auction ensues, whereby selling parties compete to offer the best deal until one party is left.
ING charges no management fee at the EPS level for investments above €2 million, although fees remain chargeable at the underlying fund level. “You might ask why we initiated this vehicle,” proposes Rowson. “The reason is to diversify our investor base. It gives a portal through a regulated channel that we didn’t have before. It has allowed us to attract new equity from different sources.” Indeed, the RFM vehicle is audited by the Dutch Authority for the Financial Markets, a factor that enables ING to attract investors beyond its currently approximately 400-strong pool.
Sometime during the second half of this year, ING REIM’s EPS will be absorbed into CBRE Investors, the real estate investment management business of Los Angeles-based property services giant Richard Ellis, after the latter purchased the former in a deal valued at almost $1 billion in February. Rowson is looking forward to the merger, which is still subject to regulatory approval. “Tjeerd will have a bigger playground then,” he says, adding that the initiative could conceivably be extended to the US and Asia. “There’s nothing to stop us from doing that sometime in the future, although there are no current plans.”
While ING’s EPS is something of a unique venture, that type of scheme is being considered elsewhere. One firm with current plans for something similar is Aberdeen Asset Management. Pertti Vanhanen, head of direct property for Europe, says: “This is something that might be of interest to our investors going forward.” While he chose not to divulge much information about Aberdeen’s plans for such an initiative, he does point to Aberdeen’s eight-strong (five open-ended, three closed-ended) Nordic fund range as a potentially ideal cluster of funds from which it could facilitate trades.
Most fund investors have ridden the value elevator down and have decided to wait until it starts to rise again, hence discount opportunities in core or core-plus funds are difficult to find
Will Rowson, ING REIM
You might ask why we initiated this vehicle. The reason is to diversify our investor base. It gives a portal through a regulated channel that we didn’t have before. It has allowed us to attract new equity from different sources
Will Rowson, ING REIM