ICG Real Estate, the real estate investment management business of London-based asset manager ICG, is ramping up its opportunistic real estate fund efforts with the launch of a successor vehicle four times the size of its first, PERE can reveal.
Metropolitan Fund II – which to date has attracted about €200 million in commitments from investors – is being focused initially on special situations investments primarily in the logistics and industrial markets.
It follows the assembly of a team with opportunistic investing experience started in 2021 by ex-Starwood Capital and TPG executive Krysto Nikolic, the firm’s global head of real estate.
The higher risk and return Metropolitan fund series was devised to complement ICG Real Estate’s existing equity investing activities, including its Strategic Real Estate Fund which is focused on sale and leaseback investments. That vehicle was closed on €1.2 billion in 2021 and a successor vehicle is understood also to be in the market.
To date, both fund series have been predominantly focused on the acquisition of forms of logistics, industrial and distribution assets.
The opportunistic Metropolitan Fund I is yet to have exits but having acquired assets in the months after soaring inflation and spiking interest rates brought prices down at the end of last year, ICG has been able to mark-up valuations to about 1.4x of acquisition prices, PERE understands. This has encouraged the firm to introduce a significantly larger sequel fund.
Metropolitan Fund II is expected to produce gross IRRs of 18-20 percent and 14-16 percent net – returns with deals in certain jurisdictions executed on an entirely unlevered basis. In other jurisdictions the firm will be using low amounts of debt.
When announcing its Metropolitan Last Mile platform in May, Nikolic said: “In the past six months, we have taken advantage of the significant dislocation and repricing in European logistics markets to assemble the existing portfolio under the radar and at very attractive prices.”
The firm said then it had acquired 35 assets through eight different deals with a gross asset value of more than €500 million in the prior nine months. Within those deals, 65 percent of the assets were located in London, Paris and Berlin.
“As the markets continue to be unstable, we anticipate that our ‘special situations’ approach to the sector will allow us to access value in an asset class that continues to have very robust demand and supply fundamentals,” he said at the time.
ICG’s Metropolitan and Strategic Real Estate Funds are part of ICG Real Estate’s broader strategy of equally weighting its efforts across debt and equity investment vehicles.
Indeed, while the firm has a reputation as one of Europe’s major real estate debt fund managers, in the past 18 months, it is understood to have deployed approximately €1.5 billion in European markets split 50:50 between debt and equity investments.
ICG Real Estate declined to comment on its fund plans.
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