EG Funds Management has raised AUD400m (€271m) for an Australian real estate fund, with backing for the first time from a European investor.

The fund is targeting real estate assets close to new infrastructure developments in Australia.

The Sydney-based firm said it is in discussion with two other potential offshore investors that are expected to invest between AUD35m and AUD85m.  

The bulk of the capital has come from Australian industry and government superannuation funds.

Roger Parker, EG executive director, told IPE Real Estate that with gearing, the fund would have the capacity to purchase AUD800m worth of assets, expected to be in Sydney and Melbourne.

He said the strategy is to buy commercial, industrial and retail assets in areas that have already been designated for new infrastructure developments.

“We will only purchase in an area near projects which have already been funded by the state or local government,” he said, adding that a large number of infrastructure projects are either under way or earmarked for Sydney and Melbourne.

EG Funds is anticipating that the assets targeted will benefit from the economic boost associated with the new projects, and their value will be enhanced.

The vehicle, known as the Yield Plus Infrastructure Fund No 2 (YPI 2), is a close-ended unlisted real estate fund.

Its successor YPI 1 is on track to achieve an annual 13% return since its inception in 2006.

Parker said the new fund is close to purchasing its first asset in Melbourne, and is undertaking due diligence on several other assets in the two capital cities.

EG Funds, which manages assets worth AUD2.4bn, began marketing its latest blind pool fund 18 months ago.

It is a co-investor in its funds, including YPI 2, on a “first loss basis”, meaning it will carry losses up to the limit of its co-investment.