A new impact fund from investment and asset manager KGAL, dubbed KGAL Core 5 Life, has reached its first closing and inked its debut deal, a sustainable residential asset in Málaga, Spain.
According to KGAL, Core 5 Life is one of the few Article 9 residential real estate funds with a European focus and seeks to take advantage of the increased initial yields of the current market cycle. It is scored against stringent ESG criteria.
KGAL reported that the fund has received capital commitments in the hundreds of millions.
Said André Zücker, managing director of KGAL Investment Management: 'Sustainable real estate investments should achieve better long-term rental and value growth against the backdrop of high energy costs and tightening EU regulation. t the same time, our investment approach protects against costly retrofits and stranded assets due to ESG deficits.'
KGAL Investment Management used part of the fund’s equity to purchase a newly-built BREEAM-certified property in Málaga in southern Spain with 142 residential units.
The new building offers one, two and three-bedroom flats and four commercial spaces on a total area of 13,500 m2, and is almost fully let. The property includes an underground car park with 215 parking spaces and six e-charging points.
The building scores environmental points with, among other things, an energy-efficient building envelope, solar thermal panels for water heating, smart meters for energy and water, and very low CO2 emissions.
In addition to affordable rents, social factors include good infrastructure and barrier-free features such as ground-level entrances, ramps and lifts. There is also a communal kitchen and coworking space. Almost all the building's service functions can be done through an app.
KGAL Core 5 Life invests in seven Western European countries with liquid housing markets and positive demographic trends, with affordable housing and high energy efficiency forming important pillars of the fund’s strategy.
With a planned share of at least 80% core properties, KGAL Core 5 LIFE will ensure a highly stable portfolio, while up to 20% core+ investments aim to contribute above-average returns. The target volume of the Article 9 fund is €400 mln of equity, with leverage of up to 45%.
'What makes KGAL Core 5 Life unique is its ESG scoring model, developed together with established external ESG experts,' added Zücker. 'We measure the fund’s environmental, social and governance objectives against more than 30 criteria – far above and beyond the industry standard. Added to this is a taxonomy check.'
