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TH Real Estate secures €700m for European Cities Fund

Meraville Retail Park

TH Real Estate has completed a first close of €500m for its European Cities Fund – its new European diversified core, open-ended fund. With leverage, the equity commitments will allow the fund to target a portfolio amount of approximately €700m from this initial capital. The Fund was launched in March 2016 with seed capital and commenced its investment programme by securing an off-market transaction in Meraville Retail Park in Bologna, Italy, as its first asset in May. It is currently progressing a number of other opportunities throughout Europe.

TH Real Estate’s European Cities Fund is a city–based real estate strategy, underpinned by long–term, structural trends, which seeks to provide investors with diversified and defensive income return and optimise long-term total return by investing only in ‘future-proof cities’ across Europe.

 

Over 200 European cities have been processed through a filtering and scoring proprietary system, developed by TH Real Estate’s research team, defining which cities are structurally positioned to grow in value over a long-term horizon. The cities were assessed based on soft (e.g. quality of life and technology scores), hard (e.g. urbanization and youth population) and growth (e.g. discretionary spending and population growth) factors, resulting in a defined list of cities supported by such factors and best placed to benefit from long term growth in demand for real estate. The Fund will not invest outside of these specified cities.

 

The Luxembourg Special Limited Partnership Fund has target scale of €3-5bn over a five year period. It has a targeted average of 30% LTV. The Fund continues to receive strong interest from global institutional investors.

 

Andrew Rich, European Cities Fund Manager, comments: "This strong first capital raise is testament to the fact that investors are looking beyond short term uncertainty and still see value in long term defensive strategies backed by demographic megatrends, driving growth in successful cities.

 

TH Real Estate has faith in the underlying fundamentals of the UK and European real estate markets that will remain attractive to investors over the long-term.  The founding principles of our European Cities strategy are to look through market cycles and focus on those European cities where people will want to live and work in the future. These cities will have their own market cycles, but over the longer term, should account for an increasing share of the region's output, benefit from structural trends and be smart destinations for long term real estate investment capital.

 

As a new Fund with capital to deploy and only one existing asset, the Fund is well placed to take advantage of any movement in market pricing. We believe that a city-based real estate strategy, underpinned by long-term, structural trends, that strikes the right balance of risk and diversification, while taking advantage of short-term pricing opportunities’ may enjoy above-average portfolio level returns, lower-than-average volatility, and modest downside risk, for long-term investors, enhanced further by a market recovery."

Disclaimer Issued by Henderson Real Estate Asset Management Limited, 201 Bishopsgate, EC2M 3BN. Authorised and regulated by the Financial Conduct Authority. TH Real Estate is a name under which Henderson Real Estate Asset Management Limited provides investment products and services. The value of investments and any income will fluctuate (this may be partly be the result of exchange rate fluctuation) and investors may not get back the full amount invested. Where opinions have been expressed, they are based on current market conditions and are subject to change without notice.

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