Internos wins new mandates, girds for expansion

There has been a lot of movement at European fund management business Internos Global Investors over the past few months, so much so that we decided to visit Paul Muno, head of Internos’s burgeoning German operations, to learn more about what was happening on the ground. We recently reported on the company’s Hotel Real Estate Fund I, but there have been a couple of key developments since then.

Earlier this month Internos completed its acquisition of Commerz Real’s real estate Spezialfonds business (CRS), now bringing Internos’ funds under management to €4.1bn. Muno says the target is for Internos to reach €5bn under management by 2015, a level that gives the company a degree of clout when pitching for mandates from the increasing number of sovereign funds exploring opportunities in European real estate.

The CRS deal made a lot of sense for Internos, as Muno himself arrived at Internos a couple of years ago from CRS, where he had helped grow the portfolio and has the advantage of knowing the assets intimately. Essentially, CRS is made up of nine funds holding 68 assets across nine central and western European countries, totalling €1.6bn in assets under management. However, the majority are logistics and office buildings in France and Germany, although with assets in Spain and Portugal, the acquisition justifies opening a Lisbon office to look after the region.

Joint founder and CEO of Internos in London, Andrew Thornton, had said when the deal was announced, that the move followed the company’s internal growth strategy: “This new acquisition moves towards Internos’ long term strategic decision to manage a diversified range of assets across varying classes, qualities and locations with a weighting towards core and opportunistic European funds.”

Over the past six months, Internos had been appointed as investment manager of London-based Local Shopping REIT, held the second close of its Hotel Real Estate Fund at €210m equity and won two further mandates - to manage a French portfolio for a Swedish pension fund, and to invest up to €200m in value-add European hotel properties for the German Saxony Doctors Pension Fund (Sächsische Ärzteversorgung).

In mid-November British Land appointed Internos to run its €230m Pillar Retail Europark Fund (PREF), as the fund nears a post-extension termination date next year. PREF, which is 65% owned by British Land with the remainder held by institutional investors, was established in 2004 with a fixed life that has been extended to 2014. With unit-holder consent, however, the fund’s life can be extended further.

PREF owns a portfolio of 10 retail parks across Spain, France, Portugal and Italy, with a total combined value of €230m. British Land is disposing of its sub-scale European business to more actively focus on its core office and retail developments in the UK.

Internos is absorbing most of British Land’s staff in Spain and France, while its Frankfurt office has been expanded to handle the team from Commerz Real Spezialfonds.

Meanwhile the Internos Hotel Real Estate Fund, under the management of Muno’s colleague Jochen Schäfer-Suren, has just transacted its eighth deal since the fund’s first closing in July 2012. The fund bought the four-star 330-room “NH Düsseldorf City Nord” hotel for around €37.5m, at an initial yield of 7.8%, from Schroder Property, acting on behalf of EREIT.

The Internos Hotel Fund I now has €235m in gross assets under management. It targets generating income returns of more than 7.5% over the next few years. According to Schäfer-Suren, “We have two or three more acquisitions in the pipeline over the coming months and thus expect to deploy the remaining equity of the fund and reach an estimated AUM of close to €400m by mid-2014. Next year we expect to launch a successor fund to this first fund focused on income and core investment strategy in the specialist hotel real estate asset class across Europe.”