Invesco Real Estate and a major Canadian investor have participated in a $500m (€475.1m) fundraise for a US ground lease fund managed by Montgomery Street Partners (MSP).

Real estate investment firm MSP said the private follow-on common equity offering for The Ground Lease REIT (GLR) was backed by a “strong institutional demand”, including anchor commitments from the unnamed “major Canadian institutional investor” and Invesco.

GLR’s follow-on offering increases the vehicle’s investment capacity to over $1.5bn, the manager said.

Formed in 2020, the GLR fund specialises in the origination and acquisition of long-term, unsubordinated ground leases on development, value-add and stabilised properties.

MSP said GLR has also closed on a $150m unsecured credit facility with an accordion feature allowing expansion of up to $400mn. The credit facility was led by NexBank and Raymond James Bank.

Murray McCabe, a managing partner of Montgomery Street Partners, said the strong demand for GLR’s follow-on equity offering validates the firm’s strategy and confirms that ground leases have evolved to become an acceptable and mainstream financing tool.

“Investors gain access to long-duration, inflation-protected real estate assets that are cycle tested while real estate owners and developers find an efficient and accretive financing alternative.

“With our renewed support and funding, we look forward to continuing to broaden interest in this emerging real estate asset class and expanding our market leadership,” McCabe said.

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