8th June 2022
Invesco Real Estate, the E82.7bn global real estate investment business of Invesco Ltd, has-backed by insuran announced it has launched its first real estate debt fund in Europe. The Invesco Commercial Mortgage Income–Europe FCP RAIF(CMI Europe) is a Luxembourg-domiciled, open-ended fund with a E1bn initial fundraising target. It is primarily backed by insurance capital demonstrating the strategy’s attractiveness for insurance firms’ Solvency II requirements.
The fund, which will prioritise lending on sustainable assets with prime ESG profiles, has already completed its inaugural transaction: a senior loan facility to finance a pipeline of six French and three Spanish logistics facilities, all pre-let to one of the world’s largest online retailers.
Unusual in the European private debt fund market, the open-ended approach marks an evolution in the asset class in Europe by providing greater liquidity for investors. The fund aims to offer institutional investors a stable, high yielding income stream and attractive risk-adjusted returns through originating loans collateralised with high quality real estate across the UK and Europe.
Focused on secured lending to well-capitalised borrowers and Core/Core+ collateral, the strategy builds on Invesco Real Estate’s extensive 10-year track record of investing in global real estate debt. This includes 173 loan originations totalling $13.1bn with a dedicated debt team having on average 16 years’ experience investing in the asset class.
ESG criteria2] are embedded into the fund’s credit analysis, due diligence and approval process, with the team analysing the quality of the assets, business plans and borrowers. Factors include EPC ratings, green building certification, renewable energy usage, and tenant ESG policies. For the strategy’s first loan, the assets are expected to achieve BREAAM Very Good certification and include photovoltaic panels, the reuse of rainwater for green spaces, and electric vehicle charging stations.
Including this loan, the firm has now committed to E150m of loans across the UK and Europe and expect to commit significant further capital prior to the end of 2022. Invesco Real Estate’s 180 on-the-ground investment professionals across its multiple office locations in Europe, as well as its network of local relationships, will provide its debt team with access to the best credit opportunities in local markets.
Andrew Gordon, managing director–Fund Management at Invesco Real Estate, comments “The aim of the fund is to invest in opportunities offering the best possible risk-adjusted returns available to a pan-European real estate debt vehicle. As a commercial actor and a relationship-based lender, this means lending across core real estate sectors such as residential, office and logistics, as well as alternatives such as self-storage, student accommodation, data centres and life sciences.
Importantly, our new fund prioritises lending on sustainable assets. Borrowers’ business plans will need to demonstrate a focus on sustainability while development loans, for instance, will focus on assets that meet best-in-class principles. Our investor base is rapidly refocusing on investments with fundamental ESG qualities.”
Andy Rofe, managing director–head of Europe at Invesco Real Estate, said “The launch of our first European debt fund underscores the maturity of the sector with the introduction of a pan-European, diversified open-end vehicle. The targeted returns for CMI Europe aim to offer a significant return premium over corporate bonds yet with a similar risk profile and stable cashflows which we believe will be able to provide high quality and predictable quarterly income streams for institutional investors.
Real estate debt has traditionally been a UK focused asset class but with the retrenchment of banks post-GFC, a European approach has become very attractive. With a focus on high-quality properties, we are looking to invest in all types of loans, including stretched senior, whole, junior and development finance. When we’ve identified the right asset, the right sponsor and the right business plan, we will invest in whichever part of the debt stack that we believe provides the best balance of risk and return for investors.”
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