IVG launches new European office vehicle

German listed property company IVG Immobilien has launched a customised European Core+ Office SICAV fund for institutional real estate investors. The fund, which is legally incorporated as a SICAV in Luxembourg, invests in selected European office locations. The minimum commitment for prospective investors is EUR 5 mln, and the target fund volume is EUR 1.2 bn.

The investment strategy of the fund is focused on Europe's key office markets. 'We rely on the markets and properties with an excellent potential for appreciation over the medium term,' said Peter Le Loux, managing director of OIK, the firm responsible for IVG's institutional fund business. The fund management aims to achieve a target yield of 8 to 9% per annum, after tax, fees and expenses. Average net initial yields are expected at 5 to 6.5% a year.

'Our locally based property managers will aim to realise the greatest possible value-enhancement by improving the letting situation and by light refurbishment of individual assets as well as by optimizing the portfolio composition over the term of the fund in line with market trends, Le Loux said. IVG's European network of 18 branch offices throughout Europe will be utilised to 'quickly identify market opportunities to purchase and sell suitable investments' as well as rental management.

IVG said that a portfolio of assets which would fit into the investment strategy of the fund has already been identified in various major cities throughout Europe. The initial fund portfolio will have a strong exposure to Germany. Other regions investments will focus on Scandinavia and Central Europe. European property markets have recently gathered momentum due to the overall economic recovery on the continent. According to IVG estimates, the rental level has bottomed out. The overall European office vacancy rate fell from 8.4% to 7.2% during the last quarter of 2006.