Invesco Real Estate, a global real estate investment manager, has launched the Invesco Real Estate European Living Fund, an open-ended fund investing in pan-European residential assets.
The Fund has an initial equity commitment of c. €140 million, which with debt provides c. €190 million of investment capacity, which Invesco intends to deploy on two initial investments. The initial capital is from three German institutional investors, with further closings planned over the next six months. The Fund is targeting an initial €500 million Gross Asset Value (GAV) over the next two to three years.
“European residential investments have shown outperformance compared with other asset classes in the long-run, whilst showing less volatility and they have also proven to be especially crisis-resistant with a high degree of income stability,” says William Ertz, Senior Director – Fund Management at Invesco. “In our view, the outlook is positive as the fundamentals are still good in metropolitan areas: an undersupply in main cities, long-term housing supply/demand imbalances, and a historical high gap to government bond yields.
For this new European Living Fund, returns will be supported by a focus on sustainability and strong asset management – such as sustainable uses for assets and high energy efficiency. A fundamental focus on green ratings, for instance, should increase attractiveness to tenants.”
Targeting a 4 per cent pa gross income return and 5.5 per cent to 7.5 per cent gross total return, the Fund has already identified its first deals in Italy and France with a combined investment volume of c €110 million.
Alongside apartment buildings for rent, the Fund also has scope to invest in alternative forms of residential investments such as micro-apartments, student housing, single-family homes for rent.
Invesco has established a strong network of local partners in all preliminary target markets due to a successful track record of investing in the European residential asset class. Over the past five years the firm has expanded its exposure to the sector for multiple mandates across multiple jurisdictions and, as at the end of H1 2020, had €2.3 billion deployed through a combined portfolio of 38 investments with 7,790 individual units across seven different countries.
Robert Stolfo, Managing Director – Client Portfolio Management at Invesco, says: “We are very excited to launch this new Fund for our institutional clients who are looking to invest in Europe. Investors have an increased demand for stabilised returns and already confirmed their appetite for the residential sector’s attractive potential with a €140 million commitment at its first close, further capital commitments of €80 million are already in due diligence. Continued investment in this sector means that European residential as an asset class has seen material growth in both liquidity and scale over the past few years. This momentum is likely to escalate further as additional European countries attract inward investment.”
