Morley, DTZ AM launch new French regional property fund

Morley and Paris-based DTZ Asset Management have announced the launch of Hexagone, a fund specialising in French regional real estate, to capitalise on investor demand for stable and high-quality French regional property.

The fund has already secured its first investment with the acquisition of six assets for EUR 84mln - two in Lyon and four in the second ring around Paris. The fund has a primary focus on grade A and grade B office, light industrial and retail assets in French metropolitan areas (over 100,000 inhabitants) and logistic assets along major transportation lines. The allocation of funds towards the second ring around Paris will be a maximum of 30% of portfolio value. Paris Central Business District and the first ring around Paris will not be part of the investment strategy.

The fund has secured equity commitments of more than EUR 30mln and aims to raise a total of EUR 210mln. 'The French regions offer an attractive investment case for real estate investors. Limited correlation to Paris and lower volatility of total returns in combination with solid market fundamentals should deliver attractive performance', said Morley's Andreas von Gossler, Hexagone's fund manager. 'The French regions continue to benefit from decentralisation, increasingly dynamic population growth and massive infrastructure investment, as well being the transition zone between north-east and south-west European integration.'

The fund targets an internal rate of return of 10% per annum over its 10 year life term. 'We aim to build a EUR 600 mln portfolio of high quality French regional assets, of which EUR 84 mln is about to be invested in a portfolio consisting of six assets in Lyon and the second ring around Paris,' said Patrice Genre, managing director and founder of DTZ Asset Management.

Hexagone will be set up as a Luxembourg specialised investment fund (a SIF) and structured as a fonds commun de placement - fonds d'investissement spécialisé (a FCP). The fund targets a net distribution yield of between 5 and 6% per annum when fully invested.