Franklin Templeton Real Asset Advisors, the private arm of Franklin Templeton, has amassed a €500m (£434m) pipeline of property assets for a newly launched fund.
Franklin Templeton Social Infrastructure Fund is an open-ended AIFMD-compliant fund available to professional advisers that focuses on social infrastructure assets across Europe across three key sectors – healthcare, education and housing – with a particular focus on key worker housing in city centres.
Around 15% of the assets will be UK-based, while the firm will also invest heavily in other major European countries such as France, Italy, Germany and Spain. The company is seeking to make a return from upgrading public sector properties and enhancing them with better services.
So far, Franklin Templeton has already completed three acquisitions outside of the €500m pipeline. They include a small medical clinic in London, a 70,000 sq ft court house in Madrid and a 120,000 sq ft elderly care facility in Milan with a combined value of around £40m. The properties offer lease terms of 20-plus years, 10 years and 30 years respectively.
Managed by Franklin Real Asset Advisors, the fund raised €158.4m during the second half of 2018.
Raymond Jacobs, managing director and portfolio manager of the fund, said: “It all comes down to the market return. There is not enough money in the public sector to upgrade infrastructure around Europe – there is a need for private capital to participate.
“There is now more demand from institutional investors to do this. Many of them are looking to diversify their real estate portfolios, and social infrastructure provides necessary services which are less correlated to the economy.”
Riccardo Abello, director and portfolio manager, added: “Historically lower entry rents and higher yields than commercial real estate in similar locations provide the potential for an attractive purchase price at acquisition.”
Going forward, the firm will focus primarily on multiple £20-£40m acquisitions. Over time, the portfolio will mostly be made up of former government-owned properties, Jacobs said. “We are working towards establishing relationships with various local government entities.
“As an impact fund, we have certain contributions to make. We offer long-term aligned capital to ensure the continued use of the building as a high-performing social infrastructure asset. We also want to make the buildings better, enhancing the function, and implement environmental upgrades.”
The fund is aiming to provide six of the United Nation’s Sustainable Development Goals: good health and well-being; quality education; decent work and economic growth; sustainable cities and communities; climate action; and life on land.
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