Last month, Connecticut-based fund manager Cornerstone Real Estate Advisers held a €175 million first close for its debut European-focused fund, Cornerstone European Core Fund. The firm is seeking to raise €1 billion for the open-ended core fund for which it will target a diversified range of assets.
However, the firm will not be the only one competing for core properties in the region. Earlier this year, rival fund manager TH Real Estate, the London-based real estate asset management firm owned by US institution TIAA, launched a European core open-ended fund with €200 million of co-investment capital provided by its parent company.
Cornerstone took a similar tactic and it is understood to have received its seed capital from parent company Massachusetts Mutual Life Company.
The pair join AXA Investment Managers – Real Assets, the Paris-based investment arm of French insurer AXA, which has raised over €500 million for its vehicle – AXA CoRE Europe – but aims to grow the fund to between €3 billion and €5 billion.
AXA IM has already been busy acquiring properties for the fund, including France’s tallest tower, Tour First in Paris La Défense, in a deal understood to be valued at €800 million.
The current popularity of European core strategies is largely because of macroeconomic conditions, such as the emerging markets slowdown and global monetary policy divergence. Against such a backdrop, the European core property market is seen as a ‘safe haven,’ said one London-based investment manager.
However, the manager added that due to the broad appeal of European core, investors may be forced to get more creative in order to get their hands on the best assets at a competitive price.
He said: “There is a shortage of prime stock combined with lower property yields. I wouldn’t be surprised to see these core funds also look at more secondary buildings, but in Europe’s best markets.”