Principal Real Estate Europe targets €800m investment for new long-income fund

Principal Real Estate Europe has acquired a warehouse asset for a newly launched long-income fund.

The manager said its first dedicated long-income European real estate fund, co-designed with Willis Towers Watson, is expected to have an investment volume in excess of €800m over the first five years of its life.

The fund expects to provide a total return that will track Eurozone CPI plus appropriate real estate risk premia through investment in long leased Eurozone real estate assets.

The fund can acquire all types of commercial real estate with leases of at least 14 years fixed term, located throughout the Euro area, with a weighting towards Germany, Benelux and France, the manager said. 

Principal said the fund’s first acquisition is a temperature-controlled warehouse asset located in North Amsterdam with a weighted average lease term of 20.5 years.

Robert Leadbetter, fund manager at Principal Real Estate Europe, said: “This is an exciting time to be entering the European long lease real estate fund market.

“There remain relatively few competing products dedicated to the acquisition and management of long-dated real estate assets in Europe, although this type of investment vehicle is increasingly in demand from investors both as a hedge against inflation and as a higher-yielding alternative to bonds of equivalent credit strength.”

Leadbetter said the first acquisition demonstrates not only that there are high-quality long term income opportunities in Europe, but that with this new fund Principal is well placed to source and execute such transactions.