EUROPE - Cornerstone Real Estate Advisers Europe has launched its first European fund - a social infrastructure vehicle - since the US-based investment manager acquired Protego Real Estate Investors in 2009.
The Nordic Social Infrastructure Property Fund will invest in public real estate assets let on long-term, inflation-linked leases to government or quasi-government tenants. The geographical focus of the fund is Sweden, although the fund may invest as much as 20% in Finland, Denmark and Norway.
The target distribution for the new fund is between 5% and 6% per annum (net of all costs), with target returns of between 7-8% per annum (net of all costs). This would assume leverage at a maximum of 50% at the portfolio level.
It is Cornerstone's first fund since it acquired Protego, a move that gave the Massachusetts Mutual Life Insurance Company subsidiary an investment platform in Europe with which to deploy institutional capital from the US.
Cornerstone Europe has begun discussions with local Nordic investors to start with, but expects to talk to other global investors from the end of the month.
The fund manager said it had gained positive feedback from early discussions with investors focusing on lower-risk alternatives with strong underlying cash flows.
Mikael Igelström, director for Nordic investment management at Cornerstone Europe, said: "The timing of the launch of this fund could not be better. Investors are seeking stable and secure cash flows from their investment portfolios, while central and local governments are seeking alternative forms of funding.
"The prospect of a significant, long term, strategic pool of investor capital that can work with central or local government in identifying and securing the right public real estate assets that match the expectations of both parties represents a unique solution for all."
Cornerstone Europe is hoping to achieve a first close on the fund before the end of the first quarter of 2011 and is targeting €250m in equity.
The investment manager will look to raise a further €250m in the future, but only once the initial batch of capital has been deployed.
Lars Almquist, business development director for the Nordic region at Cornerstone Europe, said: "This investment proposition should be particularly attractive to those investors seeking liability matching returns."
The public assets secured by the fund will be let on long-term leases of between 15 and 20 years, all of which will be CPI linked and let to strong credits, typically S&P AAA or S&P AA+, he said.
Almquist added: "The relatively high target net distributable income return should be an attractive attribute for both real estate investors, as well as potentially, fixed income investors."