Standard Life creates €600m ‘Euro Club’ for Townsend investors

Standard Life Investments has raised €300m from global investors for a continental European real estate club fund.

The fund manager announced that institutions from the US, Canada, Thailand, Netherlands, UK and Middle East – most of which were advised by The Townsend Group – have backed its European Real Estate Club, or ‘Euro Club’.

The fund is structured as a closed-ended limited partnership, but has been designed as a club fund, limiting the number of underlying investors and giving them a level of oversight on transactions.

The fifth and final close means that the fund has €600m in investment capacity and has already deployed 60% in assets in France, Denmark and Germany.

David Paine, head of global real estate at Standard Life Investments, told journalists in London that the fund had made a number of deals in Copenhagen, and had also targeted speculative logistics developments in Germany and income-producing properties in Paris.

Paine said the fund was targeting core-plus assets but its target return of 13% was above the level normally associated with such a strategy.

The announcement coincides with a wider strategic shift by Standard Life Investments in favour of continental European markets, after being publicly bullish on the UK real estate market 12 months ago.

Anne Breen, head of real estate research, said the company expected the European real estate market as a whole to outperform the UK on its own in 2015, returning 8% and 7.3%, respectively. The fund manager is positive on Spain and the Netherlands, she said.

This year, Standard Life Investments began investing on the continent on behalf of its in-house insurance capital, while its European Property Growth Fund, which was launched in 2001, recently made its first acquisition in a number of years, buying an office building in the Netherlands.

The company also announced its first real estate debt fund, having moved into property lending on behalf of its parent insurance company last year.

The Standard Life Group Pension Scheme has committed £100m (€127m) to the senior debt strategy and the fund manager is seeking to raise further third-party capital.

Having entered the real estate debt market last year, Standard Life Investments has completed £200m in deals, Paine said, with a further £175m in the pipeline, describing it as “good progress”. The deals were done on behalf of internal annuity and insurance capital.

The new debt fund, managed by Neil Slater, will be targeting 6% returns over 10 years by financing deals across the UK.