Invesco Real Estate is to commit up to 20% of its Central European Real Property Fund II to the Russian market.
The fund, which is expected to have its first closing this month, aims to invest in Russia from 2006, from which point it could allocate up to 20% of its €750m purchasing power.
The fund’s first closing is expected to raise around €120m, which will rise with debt to €300m. For the second closing in spring 2005, Invesco expects to reach €750m with debt and equity. The first phase will focus on Poland, the Czech Republic and Hungary. Guy Barker, head of fund management at Invesco, said it would target “bigger lot sizes to rise above the competition”. It will also undertake developments.
Investors in the core-plus fund have agreed to target Russia from 2006, which will help to bring higher returns than the increasingly mature central European market. “Everything about Russia is a challenge, which puts some people off but provides an element of opportunity,” said Barker.
The first fund, which had a net return of 9.4%, was attractive to German investors who were disappointed with returns in their own market and seeking high running yields. The second fund has a net return target of 8%.
However, some international investors have been wary of the higher fee structure compared with other funds, added Barker.
Meanwhile, Invesco has set up a fund to target UK private investors. The £200m, listed UK Property Income Trust will buy properties in the office, retail and industrial sectors.
