Germany-based Real IS is launching a fund targeting Australian cities, seeing more opportunity in Australia than it does in Europe.
It said the fund offered institutional investors an answer to shrinking returns in Europe and the US, as well as an alternative to the run on core and core-plus properties, particularly in Germany.
Jochen Schenk, a member of Real IS’s management board, said: “There are many good arguments in favour of setting up an institutional property portfolio fund in Australia, including investing removed from Brexit uncertainties.
“It is time to chart new courses, and, for institutional investors as well, the right moment has come to take that step towards Australia.”
The company believes the Australian market offers the potential for much higher returns than Europe.
Georg Jewgrafow, chief executive at Real IS, said: “Distributions here may carry a five before the decimal point. Investments can be made in good locations at a price level that enables returns of this kind.”
It will look to build a portfolio of retail, logistics and office assets for the fund.
The fund will focus on Melbourne, Brisbane and Sydney.
Real IS has nine properties under management in four cities, having first invested in 2005 and creating an Australian subsidiary in 2012.
Schenk said Australia was not only an attractive tourist destination but also boasted an economic success story that had been “virtually disregarded in terms of property investment”.
Ongoing economic growth – forecast to continue at 1-3% through to 2018 – as well as low public debt and a relatively young and growing population, have all combined to change the mindsets of many institutional investors.
Real IS has raised €600m for its European core and core-plus BGV VI fund, with backing from German savings banks and pension funds, as well as banks from the cooperative business.
Around €400m has been invested in building up a portfolio, with a further €160m close to being called.
The fund targets Germany, France and the Benelux countries.