Aareal set to launch e500m property fund
Asset manager Aareal is to launch a e500m fund investing in German residential properties.The fund, Aareal German Residential Fund, will be 25% equity and 75% debt funded and will invest in medium sized (e20-50m) residential portfolios in German regions such as Hamburg, Düssseldorf, Cologne, Munich and Berlin. Aareal Bank, the asset manager’s parent company, is set to invest €10m in the fund.
The fund will not attempt to buy very large portfolios, in order to avoid competition from investment banks which have targeted such assets – Morgan Stanley’s real estate opportunity fund recently bought a e2.1bn portfolio.
Aareal head of asset management Charles Pridgeon said: “We prefer to compete for off-market acquisitions below the radar screens of these big guys. It’s also not necessarily the right sort of product for our exit strategy.
“We will exit by selling small portfolios - e0.5m-e3m - to private or overseas investors who are looking for a long-term relatively high-yielding investment. We don’t expect to sell more than a fifth to tenants. Only about 43% of Germans own their own homes.”
Pridgeon said Aareal would manage the property through its own German residential business, which employs 500 people.
When complete the fund will own around 10,000 units and have a life of seven years. It is forecasting after tax and fees of 14.6%.