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TH Real Estate holds €500m first close on cities fund

The fund will focus solely on 42 European cities that the London-based real estate management firm deems to be “future-proof.”

TH Real Estate, the management firm owned by TIAA, has completed a first close on €500 million on its latest European vehicle, European Cities Fund (ECF).

The fund was launched in March 2016 with an undisclosed amount of seed capital from TH Real Estate. In total, including debt, the platform will have firepower of around €700 million at its disposal following this initial close. The target for the fund is between €3 billion to €5 billion.

In May, TH Real Estate also completed its first transaction via ECF, the purchase of the Meraville Retail Park in Bologna, Italy. The firm did not disclose the price of the deal but did confirm that it is in talks over a number of other assets across Europe.

Through ECF, TH Real Estate said it would pursue an urban real estate strategy which, according to a spokesman, would provide investors with diversified and defensive income returns by focusing on select cities on the continent.

The firm has recently embarked on a system of ranking and scoring more than 200 European cities, in order to define which urban areas are structurally positioned to grow in value over the long-term horizon, or in short are “future-proof.” Some of the variables TH Real Estate evaluated included quality of life, urbanization, youth population and population growth.

TH Real Estate has now refined the list down to 42 cities across Europe. Moreover, the firm has categorically stated that it will not invest in any cities, through ECF, outside this group.

“The founding principles of our European Cities strategy are to look through market cycles and focus on those European cities where people will want to live and work in the future,” said Andrew Rich, European Cities Fund manager.

“These cities will have their own market cycles, but over the longer term, should account for an increasing share of the region's output, benefit from structural trends and be smart destinations for long term real estate investment capital,” he added.

“This strong first capital raise is testament to the fact that investors are looking beyond short-term uncertainty and still see value in long-term defensive strategies backed by demographic megatrends, driving growth in successful cities,” Rich said. “TH Real Estate has faith in the underlying fundamentals of the UK and European real estate markets that will remain attractive to investors over the long term. “

PERE first reported on TH Real Estate’s new fund back in March at the annual MIPIM Conference in Cannes, France.