US/GERMANY - Invesco Real Estate has raised $120m (€87m) from four German institutional investors to invest in core US real estate.
Invesco MEAG US Immobilienfonds IV is the fourth in a series of investment vehicles designed to cater for German investors while also mitigating US tax issues.
Simon Redman, head of business development at Invesco Real Estate, said the fund manager had focused on getting the funds right for German investors, because of the regulatory onerous regulatory requirement involved.
"When you combine the US and Germany you have probably two of the most difficult regions to satisfy," he said.
The US real estate market is notoriously tax-inefficient for foreign investors thanks to the country's Foreign Investment in Real Property Tax Act (FIRPTA).
US politicians have proposed reforming the law, which levies high taxes on foreign investors' profits derived from property, to help attract more institutional capital into the country's market.
Thus far, however, this has only been proposed in relation to investments in real estate investment trusts (REITs) and property companies, not direct investments.
Redman said it would be helpful for FIRPTA to be reformed both for European investors and for the US real estate market.
"We know how to invest efficiently in the US, but it does affect the way you can invest," he said.
"If it changes it would certainly be there for the better, but we are not there yet unfortunately."
Invesco's new fund will invest in core and core-plus real estate in the US, and will use leverage to increase its investment capacity to $300m.
Redman said the fund manager hoped to raise more capital from German investors in 2010 and early 2011 for the 10-year fund.
"Now is the right time for the first closing of the fund, because we will be able to invest in what will be an increasingly attractive market in the US," he said.
Invesco Real Estate originated in the US in the 1980s, but the company has since branched out into Europe and Asia, expanding into Munich in 2003 through the acquisition of HypoVereinsbank's institutional real estate investment management team.
Redman said the fund's investors benefit from Invesco having both local investment expertise in the US and investor relations experience in Germany.
"We can hold investor meetings in German, which is very helpful for the clients, while they gain access to our expertise across the offices in the US," he added.