Mapletree Investments Raises $600M for First European Office Fund

Singapore’s Mapletree Investments on Wednesday announced that it had raised €507 million ($600 million) for its first European office fund as it called a final close for the private investment vehicle.

The unit of state-owned Temasek Holdings has seeded the closed-ended fund with a portfolio of seven grade A office properties in the UK and European Union, which combined represent an asset value of €1.2 billion, according to a press release issued by the company.

The third-party fundraise for Mapletree Europe Income Trust, MERIT for short, was fully covered plus half again as much, Mapletree said, with strong participation coming from new and repeat investors comprising pension funds, insurers, investment companies, asset managers and private banking clients.

“The successful fundraise of MERIT amidst the current COVID-19 pandemic demonstrates the confidence and endorsement that investors have in Mapletree’s fund management capability and track record,” said Mapletree group CEO Hiew Yoon Khong. “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.”

Time-Tested Formula

With prime markets in Europe becoming crowded with investors, Mapletree’s seven assets are spread across the second-tier cities of Manchester, Bristol, Aberdeen, Warsaw, Munich, Dublin and Utrecht.

Covering some 270,000 square metres (2.9 million square feet), the offices have a diverse tenant base with a significant number of companies from growth industries and COVID-resilient defensive sectors, Mapletree said, adding that occupancy is high and the weighted average lease expiry period is 6.8 years.

Following an approach it describes as similar to its role in other Mapletree-sponsored private funds and its four Singapore-listed REITs, the company is retaining a 27 percent stake in MERIT. With MERIT set to be managed by Mapletree Real Estate Advisors, a wholly owned subsidiary of Mapletree Investments, the company says its equity stake helps ensure that its interests are aligned with its limited partners.

The trust’s assets include 3 Hardman Street, a 12-storey building in the central business district of the northern England economic hub of Manchester; West Station, a pair of 14-storey buildings in the Polish capital of Warsaw; Nova Atria, a complex of two adjoining six-storey office blocks in the Irish capital of Dublin; and Papendorp Park, a six-building development in Utrecht, a historic city in central Holland.

With a term of five years and provisions for two one-year extensions, Mapletree has set a target internal rate of return of 12 percent for the fund and will make euro-denominated distributions on a semi-annual basis.

Unearthing Value

Mapletree announced its latest European venture as Singapore-based investors continue to push further into Europe in search of returns, as investable assets in their home market continue to prove scarce.

In mid-2019, Mapletree Investments made its first office acquisition in Dublin with the purchase of an eight-storey building, known as The Sorting Office, with 19,510 square metres of net internal area. Later that year, the firm bought a pair of purpose-built student housing properties in the UK for £96 million ($117 million).

In April 2020, Mapletree announced that it had raised $1.8 billion for its first-ever US and European logistics fund. The firm seeded that fund with a set of 262 logistics assets from Mapletree’s portfolio — 200 in the US and 62 in Europe — with a combined value of $4.3 billion.

Ascendas REIT, sponsored by Mapletree’s Temasek stablemate CapitaLand, announced last week that it would acquire an 11-asset portfolio of European data centres from subsidiaries of US-based Digital Realty Trust for a consideration of S$904.6 million ($671.7 million).