Internos Global Investors, the London-based firm, has held a second close on its Hotel Real Estate Fund I on €210 million of commitments, having been backed heavily by German institutions.
Internos launched the fund in July 2012, when it held a first close on €75 million secured from four seed investors. Since then, the company has remained on the fundraising trail and has attracted three new German pension plans, plus additional commitments from the original four.
Internos said it has now closed the fund to new investors but expects to reach total equity of between €225 million and €230 million, provided the investors re-up again by final close.
Notably, the fund – the maiden private equity real estate offering for Internos since being set up in 2008 – has zero commitment from the general partner, which Jochen Schäfer-Suren, partner and managing director of Internos’ hotel and leisure division, believed underlined the demand for the strategy of buying income-producing hotels in core European markets.
“The fund’s success is due to our focus on existing three- to four-star hotel assets with a good track record and long leases in major cities in the stable, core Eurozone countries, as well as the low interest financing environment,” Schäfer-Suren said. “Moreover, the fund’s ‘club’ nature of a small number of German investors with a coherent regulatory, legal, accounting and reporting framework has strengthened its appeal from the outset.”
The fund is structured as a German ‘Spezial-fonds’ operated by Internos Kapitalanlagegesellschaft (KAG). In order to operate as a KAG, the company had to gain a license from Germany’s Financial Supervisory Authority, BaFin. KAGs are the preferred investment vehicles for German institutional investors having been formulated more than 30 years ago. Their structure is well established and offer investors tax exemptions.
So far, Internos has invested in six assets for the vehicle. It has exchanged contracts on a seventh, is in advanced talks on an eighth and expects to enter into exclusivity on a ninth.
Investors in the fund have discretion over whether an asset should be bought, but so far no investment has been rejected, according to Schäfer-Suren. It has acquired assets in Germany, Austria and the Netherlands.
Because of the rate of deployment, Internos expects the fund’s investments to reach as much as €300 million within the next six months and €400 million of assets under management by late 2014 as the company commits the additional equity.