EUROPE - Scottish Widows Investment Partnership (SWIP) has signalled its intention to re-enter the continental European real estate market with the launch of retail fund run in partnership with Cushman & Wakefield Investors (CWI).

PURetail will be a diversified pan-European vehicle for institutional investors, focusing on inner city retail assets where demand is high and supply is constrained.

SWIP, which is owned by the UK's Lloyds Banking Group (itself 43% owned by the UK government), has a number of Lloyds clients and external investors, for whom it has not deployed capital on the continent for two years, according to Richard Matthews, head of international property and strategy at SWIP.

Since the start of the real estate downturn SWIP has only been active in the UK, most notably with the purchase of the Hermiston Gait retail park in Edinburgh for £66m (€71.9m) in September.

The new fund is aiming for a first capital fundraising close in the first quarter of 2010 and plans to make its initial wave of investments in 2010, targeting France, Germany, Sweden and the UK.

"Our research, looking forward, suggests the retail sector is likely to recover certainly quicker than the office sector across most markets in Europe," said Matthews.

"The focus of this fund is very much on the core inner city, supply-constrained locations where retailers are going to continue to want to be."
CWI said earlier in the year it was looking at launching a pan-European fund, specifically targeting urban and high street retail.

Matthews said SWIP had partnered with the investment manager because of its own knowledge and experience, as well as the resources it could pull on from the wider Cushman & Wakefield parent group.

He added that pension fund investors were keen to gain access to high street retail real estate investments outside their domestic markets, but this often proved difficult because of the size of assets in the sector.

"The average lot size tends to be fairly small and it is very hard for a cross-border investor to actually get hold of the right sorts of assets at the right time in the cycle," he said.

Prospective investors will have the option of opting out of the fund's UK exposure - a move which Matthews said would appeal to UK investors who already had already built up domestic high street retail portfolios.

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