SWIP, C&WI unveil EUR 500m pan-European retail fund

Scottish Widows Investment Partnership (SWIP) is teaming up with Cushman & Wakefield Investors to launch a new pan-European retail fund which is expected to have a spending power of EUR 500mln and will target city centre retail assets. ‘We are in the process of raising equity for a new fund - Puretail (Pan European Urban Retail Real Estate fund), and we hope to hold the first closing in this quarter with equity of around EUR 100 mln,’ said Malcolm Naish, head of real estate at SWIP.

The fund - the second pan-European vehicle launched by the UK asset manager - will be part of a joint venture with Cushman & Wakefield Investors, who will asset-manage the fund while co-investing in it to demonstrate the alignment of interest. ‘We will be the fund manager but C&W Investors will bring their retail expertise and their knowledge of the local markets,’ Naish added.

The vehicle will target existing retail assets and small retail centres as well as redevelopment projects in 22 European cities, with a primary focus on Germany, France and Sweden. SWIP hopes to raise a total of EUR 250 mln of equity from six to eight institutions at final closing, which with leverage of up to 50% will bring the fund’s warchest to EUR 500 mln. ‘City centre retail property generally is a difficult market to get access to for investors, mostly because lot sizes are small, ranging from EUR 10-40 mln. But it is a sector which has shown stability and good returns, while it also provides a good level of diversification,’ Naish said. He expects the sector to rebound as city centres regain ground across Europe. ‘City centres are becoming increasingly attractive. We saw people increasingly relocating to the centres from the suburbs, also as a result of increasing awareness about sustainability. People are becoming more aware of the impact of travelling.’

Puretail will have a core/core plus profile, and will target annual returns of 10-12%. ‘The timing for the launch of the fund is very good: we see that the market is coming back and the biggest opportunities are now in Continental Europe,’ Naish said. ‘This does not mean that the UK does not offer value at the moment, but it won’t be our primary focus.’

SWIP, the asset management arm of Lloyds Banking Group also manages a European Balanced Property Fund, which invests in Germany, France, The Netherlands, Spain and Portugal. The fund is now fully invested.