Aberdeen Standard Investments has launched a European residential property fund supported by cornerstone investor Pensioenfonds Metaal en Techniek (PMT) and its fiduciary manager, MN.
Initial investments in excess of €350 mln have been received from eight investors in the Netherlands, Switzerland, and Luxembourg.
'The secure long-term rental streams provided by the private rented residential sector are a good opportunity for investors,' said Aberdeen's global co-head of real estate, Pertti Vanhanen.
'In Germany approximately 50% of the population rents privately and the sector is an established asset class that saw €16 bn of investment in 2017. Denmark, Sweden, the Netherlands, Switzerland and France also have burgeoning rental markets.'
The fund is the first open-ended property fund of its kind to invest in the residential sector on a pan-European basis and will focus on the private rented sector (PRS). With further fund-raising planned, the fund is intended to grow to above €1 bn over the next five years.
The fund will be managed by Marc Pamin based in Germany, supported by assistant fund managers Ed Crockett (in the UK) and Ole Tange (in Denmark), and a wider team of managers responsible for transactions, asset management and development.
Up to half of the total capital will be deployed in Germany, with the remainder invested across cities in western Europe, including the UK. The fund will target a return of 5-7% (net of fees), with an income element of 3-4% per year. Debt will not exceed 40% (loan to value) at a fund level, with a long-term target leverage of 25%.
'The fund represents a good match with our investment strategy,' said Hartwig Liersch, CIO of PMT, which invested €150 mln in the fund.
'The focus on rental income from housing, reasonable management fees, lower transaction costs and low leverage are in line with PMT's investment plans. Moreover, the fund's sustainability objectives mean that the fund is also future-proof in that area.'
The move represents PMT's first step towards more investments in sector-specific funds, such as affordable rental stock, with a total target of around €1 bn.
PMT has been building a European real estate portfolio of approximately €2.5 bn since 2014 with investments in mixed commercial real estate funds (shops, offices and logistics).
'In almost all leading real estate funds, shops, offices and logistics are the most important components,' commented Jeroen Reijnoudt, head of PMT's international real estate investments.
'The housing sector, which is missing in this type of fund, can compensate for the major disadvantage of commercial real estate, namely cyclically-certain operational costs. Residential construction has a much more stable, less cycle-dependent occupancy rate,' Reijnoudt concluded.