REAL ESTATE - Pension funds and other institutional investors are turning to continental European real estate as a partial exit route from an underperforming UK market, according to Ben Stirling, head of real estate at Morley Fund Management.
“UK institutions had been looking to invest in continental Europe because there’s a strong diversification case for it,” he said. “Now there’s a strong UK argument for investment in continental Europe.”
Return forecasts for the UK have come down relative to continental Europe in the past six months. Stirling pointed to Morley estimates the UK at 100 basis points lower than Europe for the next five years.
The fund manager has invested £1.2bn (€1.78bn) in continental European real estate after setting a target of £1bn two years ago.
Stirling spoke to IPE Real Estate as Morley reported the closure of its heavily oversubscribed Central European Industrial Fund (CEIF), a joint venture with real estate firm Teesland. The closing raised €147m from nine investors, including Dutch pension funds PGGM and TKP.
Launched in August 2005, the fund has already invested €140m in 13 multi-let industrial properties in Poland, Hungary, the Czech Republic and Romania. It will invest a further €360m over the next three years.
The fund’s closure came as parent company Aviva reported a half-year 45% increase in operating profit for all business segments, including 10% growth in continental Europe to £7.3bn. The firm’s global fund management operations grew 66% to £2.5bn.