Mapletree raises 507 million euros for its first European office fund

MAPLETREE Investments has raised 507 million euros (about S$816 million) at the closing of its first European office fund, it said on Wednesday.

The third-party fundraise for Mapletree Europe Income Trust (MERIT) was about 1.5 times covered, with participation from new and repeat investors comprising pension funds, insurance companies, investment companies, asset managers and private banking clients.

MERIT's portfolio consists of seven Grade A offices with a total net lettable area (NLA) of about 270,000 square metres (sq m) at a total asset value of 1.2 billion euros (S$1.93 billion).

Located in key European and United Kingdom (UK) cities, the buildings host tenants from varying sectors including technology, media, healthcare and pharmaceuticals. The regional cities include Manchester, Bristol, Aberdeen, Warsaw, Munich, Dublin, and Utrecht. The portfolio has a weighted average lease expiry of 6.8 years, backed by "high occupancy".

The trust has a target internal rate of return (IRR) of 12 per cent, which Mapletree hopes to achieve through yield and growth.

According to Mapletree, moderate levels of new developments, low Grade A vacancy rates and above average levels of pre-leasing could mitigate demand risks brought about by Covid-19. It also expects office areas to recover at a faster rate than the rest of Europe on average.

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In a press statement, Hiew Yoon Khong, Mapletree's group chief executive officer, said that since 2015, when Mapletree expanded beyond Asia and entered markets such as Europe, UK and the United States, the group has nearly doubled its assets under management and has grown its funds under management by 50 per cent.

"Investors of MERIT will benefit from a robust and stable income stream generated from a portfolio of high quality European commercial assets, anchored by long lease profiles."

Mapletree will retain a 27 per cent stake in MERIT, which would align itself with investor interest, it said. This is similar to its approach with other Mapletree-sponsored private funds, and Mapletree's four Singapore-listed real estate investment trusts.

MERIT has a term of five years with provision for two, one-year extensions. It will make distributions on a semi-annual basis in euros.

The trust will be managed by Mapletree Real Estate Advisors Pte Ltd, a wholly-owned subsidiary of Mapletree. MERIT will be Mapletree's fourth fully seeded fund and 11th private equity fund.