Principal launches first dedicated long income focused European real estate fund
Principal Real Estate Europe (Principal), the European real estate investment arm of Principal Global Investors, has launched its first dedicated long income focused European real estate fund (the Fund).
With a target investment volume in excess of EUR800 million over the first five years of its life, the Fund’s investment objective is to provide a total return that will track Eurozone CPI plus appropriate real estate risk premia through investment in long leased Eurozone real estate assets.
The Fund’s first acquisition is a temperature-controlled warehouse asset located in North Amsterdam with a WALT of 20.5 years. The main tenant of the building is the Eye Film Museum.
The Fund investment strategy has been co-designed with Willis Towers Watson (WTW) in order to create a product that is especially suited to meet the needs of European institutional pension fund investors while simultaneously benefitting from the market knowledge and on-the-ground asset management and transactional experience of Principal. The Fund will access long dated inflation linked income streams backed by investment grade credit at a time when real estate provides an attractive spread against other asset classes.
The Fund has been developed to provide institutional investors with access to the relatively underdeveloped long lease real estate investment fund offering in Europe, translating a strategy that has proved highly attractive to institutional investors in the UK into Continental European markets. The Fund will seek to take advantage of the relative scale of the European real estate market, using Principal’s experienced team of property investment professionals located on the ground throughout European markets to source appropriate acquisition opportunities. The fund can acquire all types of commercial real estate with leases of at least 14 years fixed term, located throughout the Euro area, with a weighting towards Germany, Benelux and France.
Robert Leadbetter, Fund Manager at Principal Real Estate Europe, says: “This is an exciting time to be entering the European long lease real estate fund market. There remain relatively few competing products dedicated to the acquisition and management of long dated real estate assets in Europe, although this type of investment vehicle is increasingly in demand from investors both as a hedge against inflation and as a higher yielding alternative to bonds of equivalent credit strength.
“Our first acquisition demonstrates not only that there are high quality long term income opportunities in Europe, but that with this new Fund Principal is well placed to source and execute such transactions.”