Value add space attracts growing number of vehicles

A number of smaller and larger fund managers are back on the capital-raising trail for value-add vehicles targeting Europe.

Earlier this week, it emerged that Tristan Capital Partners is launching a new €950 mln fund that will invest in value-add opportunities across Europe. European Property Investors Special Opportunities 4 will target net returns of 15% and invest across all sectors in Europe with the first close expected by the end of Q2.

With a maximum loan-to-value of 60%, the fund will have a firepower of almost €2.4 bn.

In a market update, Tristan’s CEO Ric Lewis told PropertyEU that its current opportunity fund EPISO 3 which it closed just over a year ago was already 85% committed. ‘It will be out of capital by the end of Q2,’ he predicted. ‘That’s one year ahead of schedule,’ he added.

Other boutique fund managers active in the value-add space in Europe include Patron Capital, which is eying a €1.1 bn fund and Rockspring Property Investment Managers which is targeting €1 bn. According to a company update in PropertyEU's latest Top Investors survey, the firm already raised €900 mln in 2014 and is targeting a LTV average of 50%.

Other private equity firms actively raising capital for value-add vehicles include ECE Real Estate Partners which is targeting €750 mln for its second European shopping centre fund, and Herbert Management Corporation which is eying a similar amount for its fourth pan-European vehicle.

London-based Benson Eliot has likewise returned to the capital-raising trail and is believed to targeting a total size of €600 mln for its fourth value-add diversified European fund. According to data from fund data provider Preqin, it has already had a first close of just over €50 mln.

UK peer Internos Global Investors is believed to be mulling its first pan-European vehicle with a target volume of a €500 mln while another London-based firm Europa Capital announced this week that it has acquired a retail park in the UK for £20.6 mln (€28.8 mln) as part of a new value-add joint venture with Ediston Real Estate.

Heavyweight players are weighing in as well
Heavyweight players affiliated to insurers or financial services companies are targeting the segment as well. Earlier this month, real estate investment manager AEW Europe announced that it had raised €235 mln for its Europe Value Investors Fund at the second close. The fund expects to undertake further closings this year and will target a total investment capacity of €700 mln.

It will focus on core-plus and value-add opportunities in the office sector mainly in Germany, France and the UK, AEW Europe said.

Earlier this week, PropertyEU revealed that AEW Europe is also on the brink of launching a €3 bn pan-European debt fund as a follow-on vehicle to its Senior Loan Fund to capitalize on ‘strong appetite’ for debt vehicles.

Further details regarding the fund and its investment remit have yet to be disclosed, but the company's CEO Rob Wilkinsonsaid that marketing will start next month. AEW Europe has acquired more than €1 bn of value-added and opportunistic assets since 2010 and is anticipating ‘significant growth’ in the sector over the next few years, Wilkinson said.

US-based Invesco Real Estate is eying €350 mln for a European value-add vehicle while Paris-based AXA Real Estate has already raised €235 mln for a pan-European value-add strategy.

US connection
Meanwhile another US asset manager Cornerstone is understood to be fund raising for a new value-add vehicle with a focus on both Europe and North America. Cornerstone Real Estate Fund X LP is seeking a total volume of $750 mln (€670 mln) and had its first closing in February after raising $116 mln (€103 mln) from a total of five investors.

Cornerstone Real Estate Advisers, with offices in the US, UK, Europe and Asia, is a subsidiary of Babson Capital Management, in turn a member of the MassMutual Financial Group.

Pan-European fund manager Aerium is likewise staking out the value-add space in Europe. The firm, in which US-based NorthStar Realty Finance Corporation (NRFC) recently acquired a 15% stake, manages around €6.1 bn of real estate assets across 12 European countries and is working to raise capital for its 17th fund, a pan-European value-add vehicle.