Those looking for proof that investors are waking up to the possibilities of private equity real estate in Europe need look no further than Europa Capital Partners' second opportunity fund.
Not only has the fund received international interest, attracting 60 percent of its commitments from the US and the remainder from Europe, Canada, Australia, Asia, and the Middle East; but the fund's €450 million ($546 million) final close in August is 50 percent above the fund's original €300 million target. With debt, that gives it leverage of almost €2 billion.
And Europa says it could have been bigger. “We kept the fund this size because it suits the deal size we do,” says Peter Cluff, one of the firm's principals. “We're the equivalent of a mid-market fund in the private equity world.”
Europa, which was formerly known as Beckwith Capital Partners, dates back to 1995, and was founded by four of its current principals alongside London and Edinburgh Trust founder Sir John Beckwith. After one UK- and one France-focused fund, the firm launched its first pan-European vehicle, the €225 million Europa Fund, in 1999. It has since acquired 14 properties.
Europa Fund II will follow broadly the same strategy as its predecessor. The fund, an English limited partnership, is targeting an IRR of 20 percent and is mandated to invest in turnaround opportunities and developments in the EU, Norway and Switzerland, and to leverage its transactions by 75 percent.
“It's a similar approach to our last fund,” explains Cluff. “We're using our country partner network to access deal flow, focusing on transactions that are below the radar of the large funds but too big for local property developers.”
Thanks to a loan facility arranged through the Bank of Scotland, the firm has already made four investments totaling €500 million in value and using approximately €100 million of equity. These include an in-town distribution park in Warsaw, a development project in Budapest, and office properties in England and the Netherlands.
Cluff says that the firm is expecting to focus its activities on the logistics, retail and office sectors; but he stresses that they're keeping an open mind.
“We're an opportunistic fund, so we have to follow the opportunities,” he says.
FUNDS & INVESTORS
£1 bn fund targets Middle East investors
Paul Bloomfield, a property developer who made his fortune in the 1980s, and former Tishman Speyer UK head Keven McGovern are reportedly attempting to raise a £1 billion (€1.5 billion; $1.8 billion) commercial property fund from Middle Eastern investors. The backers are hoping to capitalize on the wealth created in the Arab peninsula by rising oil prices. The fund, which will be run through a vehicle called Belgrave Investments, will target hotels, retail, cinemas and distressed assets. It will have an investment threshold of around £5 million, and is limited to a maximum of 14 investors. The backers hope to float the fund on AIM within the next twelve months.
First's first fund
First Property Group, the UK property asset manager, has won an agreement to manage a new property investment fund on behalf of the Universities Superannuation Scheme (USS), the UK's second largest pension scheme. USS will invest up to £50 million ($90 million; €74 million) in the fund, which will be able to leverage deals by up to 75 percent. The fund will invest in retail, office and industrial property in the UK and in central and eastern Europe, with a typical investment being between £3 million and £30 million in size. First Property has offices in London and Warsaw, and currently has £21 million of funds under management. It also operates an online commercial property transaction platform.
New UK property angels
Beer & Partners, a UK business angel network, has launched a property finance division. Beer Property Finance will offer packages specifically for residential and commercial property development valued at between £1 million (€1.5 million; $1.8 million) and £100 million. The division is being headed by former investment banker Paddy Murphy. It will operate from headquarters in Kent, and will also have a network of satellite offices located around the UK, mirroring the structure of its parent organization. It will offer debt, mezzanine and equity finance options for all types of property transaction, including development, bridge finance and commercial mortgages.
DB Real Estate and Goldman in bond deals
DB Real Estate is planning a bond backed by three of its London commercial property assets. The £282 million ($502 million; €417 million) bond issue will refinance two City and one West End properties from one of the firm's openended fund, and is intended to give smaller investors real estate exposure without direct ownership or a large fund commitment. Deutsche Bank will be lead manager of the bond sale. In other bond-related news, ratings agent Fitch has upgraded two bonds tied to a commercial property loan that Italian banking group Banca Intesa granted to Goldman Sachs' Whitehall fund for the acquisition of property group Telemaco Immobilare.
ING's Osiris fund of fund raises £200m
ING Real Estate Investment Management's Osiris fund of funds has raised £200 million (€297 million; $359 million). Targeting smaller UK pensions that may not be able to access other property vehicles, Osiris was the first European fund of funds focusing on real estate when it was launched two years ago with a £250 million target. It could reportedly hit this target by year's end. The fund has 27 investors and has commitments to 23 real estate vehicles, including recent investments in the Henderson UK Shopping Centre Fund and the Scottish Widows' Airport Industrial Fund. The fund posted a 20.4 percent return for the 12-month period ending in March.
Stouthamer hires former colleague
Willem-Jan Pelle, the former head of legal and fiscal affairs at Dutch pension fund manager MN Services, has joined Composition Capital Partners, the real estate fund of funds manager set up by his former colleague Erwin Stouthamer earlier this year. Stouthamer left his previous role as MN's head of international real estate in January. Pelle, 46, spent 11 years with MN until leaving in August. He has also worked at independent property company Wereldhave, and has 20 years experience as a legal and tax attorney. Amsterdam-based Composition is currently raising two €150 million funds of funds, targeted on Europe and Asia respectively.
ING Real Estate chief quits
Paul Trip, the chief executive of development at ING Real Estate, has stepped down due to repeated delays at a shopping complex that the international firm is developing in Warsaw. Rodamco Europe and ING Real Estate made the joint acquisition of the €400 million ($490 million) Zlote Tarasy project, which includes retail space, offices and a cinema, in August 2001. Its original completion date was 2004, but it is now not expected to be completed before the second half of next year. Trip leaves the firm after fifteen years on November 1st. His role will be taken by ING Real Estate CEO George Jautze until a permanent replacement can be found.
Seven Dials founder moves to Alecta
Stephen Palmer, the co-founder of independent property fund research company Seven Dials Consulting, has left the firm to join Swedish insurance and pension fund manager Alecta Investment Management. While with Seven Dials he co-authored a report, published last April, which found that the fund management industry would feel increasing pressure to provide more disclosure of fees and costs. The company has said that it plans to refocus its business on product development and fund structuring following his departure. Palmer joins Alecta as its UK and continental European real estate portfolio manager, where he will be responsible for looking after a €750 million ($919 million) portfolio from his London office. His predecessor in the role was Neil Turner, who left to become head of international property investment and research at Schroders last June.
Botbol joins UBS
Lionel Botbol has been appointed managing director with responsibility for continental European real estate investment banking operations at UBS. He joined the Swiss bank in July after a seven-year stint heading the European real estate advisory and investment banking team at JP Morgan responsible for activities in France, Belgium and southern Europe. His fourteenyear career in the sector has included work on a €3.5 billion ($4.3 billion) France Telecom real estate disposal, and a Telecom Italia asset sale worth €2.9 billion. In his new role he will be based in London, and will report to Alex Wilmot-Sitwell and Jeff McDermott, UBS's joint heads of European investment banking.
Muir changes roles at JP Morgan
James Muir has joined the real estate investment banking team at JP Morgan. He was previously a property analyst, and since April had headed the bank's property equities coverage. In his new role he will work with Andrew Penny, who took over as European head of real estate investment banking from John Zehner in April when he left to head up the bank's South African office. Muir and Penny have previously worked together to produce joint reports analyzing property securities.