ING Real Estate Investment Management (ING REIM), the world’s largest property fund manager with €65.3 billion of assets under management, has held an initial closing for its European Shopping Centre Fund (ESCF).
The firm said in an announcement that it had corralled €60 million from five investors for the seven-year, closed-ended fund and that a further equity closing was expected in the ‘coming months’. The vehicle will be used to invest in shopping centres across continental Europe.
ING REIM will deploy the equity of the fund using gearing at a loan to value ratio of a maximum of 50 percent. It is expected to provide an IRR of 11 percent to 13 percent from investments.
Up to 70 percent of the assets purchased via the fund are expected to be from core markets. ING REIM said it had selected 11 countries based on ‘their underlying economic fundamentals as well as their retail real estate market characteristics’. However, the firm also said the remaining capital would be devoted to ‘value-add’ investments.
Pieter Hendrikse, the chief executive officer of ING REIM in Europe, said the fundraising environment was still challenging but its background in retail investments in Europe – the firm has more than €10 billion of assets under management in the sector – had given investors confidence to continue committing capital to its funds.
He said: “We expect to reach our target equity raise during the year as we benefit from investors’ growing appetite for the sector.”
He added: “ESCF benefits from excellent market timing. At this point in the cycle, yields are above historical long term averages and offer an unprecedented spread to interest rates. This is happening in the context of stronger sales performance by retailers which hints at healthy rental growth in the coming years.This is especially true in the Western European markets where the investment focus lies now.”
The fund has already been used to buy an asset in Sweden and is also currently in negotiation with owners in Germany, France and the Netherlands.
The news of the new fund comes at a potentially transitional time for ING REIM. The firm is currently at the centre of a bidding process after its parent company, ING, embarked on a strategic review which could see it sell the global property fund management business early this year.