Franklin Templeton’s first real estate-oriented social impact infrastructure fund in Europe has bought its first assets and expects to add several assets in the current quarter.
The Franklin Templeton Social Infrastructure Fund (FTSIF) has bought a justice court house in Madrid, a medical clinic in London, and an elderly care facility in a suburb of Milan. Financial details were undisclosed.
Managed by Franklin Real Asset Advisors (FRAA), the open-ended FTSIF raised €158.4m during its initial closing last year. The investor base of eight European and Canadian institutional investors was led by VBV-Vorsorgekass, a severance payment fund in Austria.
The fund will invest in core, income producing assets located in, or around, large communities in the European Economic Area, Switzerland and the UK.
The manager said it has a pipeline of over €500m of investments and expects to transact several additional assets in the first quarter of 2019.
Raymond Jacobs, a managing director and portfolio manager of the fund, said: “There is a widening gap between what is needed to build and maintain adequate social infrastructure and the resources available to fund these projects.
“Public investment alone is not sufficient to fill this gap, and social infrastructure has emerged as an important, institutional-scale opportunity for private investors to align their portfolios with societal benefits and achieve competitive financial performance.”
Riccardo Abello, director and portfolio manager, said: “We believe that local real estate markets move independently from one another, so a European investment program has historically created natural diversification.”
In addition, due to the nature of the essential services provided by social infrastructure assets, returns are expected to be lowly correlated with the broader market, Abello said.
“Finally, historically lower entry rents and higher yields than commercial real estate in similar locations provide the potential for an attractive purchase price at acquisition.”