NAI Apollo funds investing €150m in kindergarten sector

Luxembourg investment company Apollo Real Estate Advisor, part of the German group NAI Apollo has launched its first sub-fund investing in German kindergartens on behalf of an anchor investor from the insurance sector.

It is targeting German professional and semi-professional investors, and will invest in both existing day care centres and project developments. It aims to raise equity of €75m and leverage the same amount again. The target IRR is 6% to 6.5%, with the fund expected to be fully invested in four years, and to then run for ten years.

The fund has already bought its first four assets in North Rhine-Westphalia (Duisburg, Cologne (2) and Oberhausen), for €12m of the €20m already committed from investors, with several other properties under negotiation.

According to investment manager Martin Karg, "The demand for day care slots has been rising continuously in Germany for years. State subsidies and high demand ensure stable cash flows in a niche segment."

The most attractive cities for the fund, said Karg, are those with at least 100,000 inhabitants, with operators being either private or from religious or public institutions – with a broad mix of operators being specifically sought. Karg, who brings experience with him from previous employer AviaRent (see elsewhere in this issue), which has over 2,000 child care places under management in Germany, but is easing out of the sector. A recent report by the prestigious Institut für Wirtschaft (IW) in Cologne suggested that Germany is experiencing a shortage of 230,000 kindergarten places.