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Invesco to close second European value-add fund on €750m – Exclusive

The US real estate manager aims to invest the vehicle’s capital in distressed opportunities over the next three years.

Invesco Real Estate is expected to close on a total of €750 million for its second pan-European value-add vehicle, with a final close anticipated at the end of August.

Having held the fund’s third close in April, Invesco has received €550 million in capital commitments to date from 18 European, UK and US investors. The fund has a €750 million target and hard-cap.

Invesco said 90 percent of investors from the predecessor fund had committed to EVAF II. The third close was held at the end of April, and two investors from that close were previous investors, according to Andrew Hills, managing director of global client portfolio management at Invesco.

Although the covid-19 crisis has slowed down decision-making processes, it has also boosted the appeal of value-add strategies to investors. “Decision making is slower than it was pre-crisis, everybody is working from home, which has also contributed to slow down the process,” Hills told PERE. “That said, there are now investors that were traditionally investing in core opportunities that are eyeing with interest value-add strategies’ opportunities because they see potential dislocation in the market.”

To date, Invesco has invested 18 percent of the fund’s capital in four investments in the logistics and residential real estate sectors in Italy, Spain and central Europe. According to Hills, Invesco completed its most recent acquisition in Milan during the pandemic but “the transaction was really advanced entering the crisis.”

Aside from the Italian acquisition, the firm has not deployed any capital from the fund in the last couple of months and is waiting for more distressed assets to come to market. “We think we will find good opportunities arising from this crisis in the next year or in two,” said Hills.

With 50 to 60 percent leverage, EVAF II is expected to have up to €2 billion to be deployed over the next two to three years.

“We have an investment period of three years from the final close in August,” Hills said. “We think the best investment opportunities will arise over the next couple of years as we see the markets shake up economically.”

He added that the fund will be able to take advantage of the economic fallout from the crisis over the coming quarters. “Going into the next quarter, we will start seeing the real impact, and that’s when we will start seeing a lot more distressed opportunities.”

With its second European value-add fund, Invesco will continue investing in urban residential, logistics and ‘new generation offices’ – centrally-located office properties focused on the technology and telecom sectors within cities.

EVAF II’s strategy is largely a continuation of EVAF I’s investment thesis, focusing on Europe’s most liquid markets where Invesco’s value-add team employs active asset management across sectors to deliver properties for exit into the core market. EVAF I was generating gross since-inception returns of 22 percent as of March 31.