INTERVIEW Rockspring eyes €500m final close for TransEuropean VI fund

European fund manager Rockspring Property Investment Managers hopes to raise up to €500 mln in the second close of its TransEuropean Property VI fund (TEP VI), which could take place as early as this month.

‘We are working with a number of investors ahead of the fund’s second closing,’ said Paul Hampton, Rockspring partner and fund director of the TransEuropean series, told PropertyEU this week. ‘Our initial target was to raise €400 mln of equity, which would make TEP VI the largest fund within the TEP series. At this point we are making excellent progress towards that goal - our upper limit is €500 mln.’

Rockspring has invested more than €270 mln on behalf of the fund since its first close in October last year. In February, it announced that it had closed three transactions on behalf of the fund: a 45,000 square metre business park development in Geneva that was acquired off-market, a 10,111 m2 office in Hammersmith in London and a portfolio of four logistics assets totaling 214,000 m2 along the north-to-south logistics corridor in France.

‘These deals are absolutely consistent with where we see value at the moment,’ Hampton said. ‘In Geneva, for example, we are developing out a business/hi-tech campus in what is an acutely under-provided for submarket. This will be the third follow-on deal in a series of successful developments undertaken by Rockspring in Plan-les-Ouates in the last 10 years.’ The French logistics portfolio, which is located across France, offers ‘a strong opening cash flow together with quite a bit of value upside’, Hampton said.

Doubling down in Europe
Rockspring has doubled its European investment year-on-year, investing €1.45 bn last year, up from €760 mln in 2014. The fund manager’s biggest acquisition in 2015 was that of a €350 mln portfolio of German out-of-town retail warehouse assets in a joint venture with PGGM and AG Real Estate. The portfolio was acquired from a joint venture between Capital & Regional and a real estate fund managed by Ares Management in February.

‘We feel that both the UK and continental European markets offer some interesting investment opportunities at present,’ said Hampton. ‘Our main focus this year is to close out our fundraising for our TEP VI fund. That really is the most important thing to us. We may find enough opportunities to fully invest our new fund within 18 months, although we have given ourselves a window of 24 months.’ With gearing, the fund is expected to have firepower of around €1bn, he added.

International investors have also shown interest in TEP VI: at the fund’s first close, Rockspring attracted investment from five investors from the US, continental Europe and the UK. ‘We’re very proud of the fact that they are all repeat investors,’ he said. The fund has an ambitious target annual net return of 12%.

However, at least 50% of that is expected to come from distributable income, Hampton said, citing the strong focus on occupiers and investing in sustainable real estate within dominant metropolitan areas across Europe. ‘Although this income helps to provide a defensive and slightly different edge to our strategy, we are not chasing yield - that was the mistake many made in the last cycle,’ he warned.

Out-of-town retail
While TEP VI primarily invests in value-add office, retail and industrial properties across continental Europe and the UK, out-of-town retail is becoming the sweet spot. ‘We have, for some time, been strategically acquiring out-of-town retail, especially grocery anchored retail, backed by strong catchments because of the imbalance between supply and demand,’ Hampton said. ‘Looking back, the sector has undoubtedly been one of the better performers - in terms of income stability - since the economic downturn and that is attractive to our investors. We have a tenants’ partnership program which has served us well over the years - and indeed the relationships we have formed with key occupiers has also resulted in some exciting buying opportunities.’

The latest TransEuropean fund is a beefed up version of its predecessor, TransEuropean Property V, which was launched in 2011 and raised €350 mln. The TransEuropean series was first launched in 1992 and has since invested almost €2 bn across 14 European countries, including the UK, Germany and France. The UK accounts for around 45% of Rockspring’s overall portfolio. Germany and France combined account for another 32.5%.

Rockspring has 15 active funds and separate accounts, totaling €8 bn of AUM.