EG raises $800m for new fund targeting ‘superior returns’

EG raises $800m for new fund targeting ‘superior returns’

14 June 2019

EG, a leading Australian real estate fund manager, has announced the launch of a new core enhanced fund with equity committed from four investors providing the ability to invest over $800 million.

EG Australian Core Enhanced Fund (ACE) is an open-ended, diversified fund targeting office, retail and industrial in Australia.

“Investors are increasingly interested in the superior risk adjusted returns that can be realised from assets which can be re-positioned to core, while ensuring the additional risks are managed by a proven management team” said Head of Australian Core Enhanced Fund Daniel Farley.

“EG is looking forward to many more successes for our investors with the launch of ACE.”

EG’s new fund comes at a good time, given the Reserve Bank’s cutting the cash rate to a record low of 1.25 per cent last week, reducing returns generated on bank term deposits and bonds, and steering more capital into real estate investment opportunities, including A-REITS, unlisted trusts and real estate debt funds, where higher returns are on offer, notes The Australian Financial Review.

EG will utilise its’ proprietary data engine and risk management platform, PRISMS® when assembling the portfolio. Each asset is assessed on an individual basis to determine the optimal asset management strategy to maximise returns and/or transition non-core properties to core assets.

EG are already considering a number of properties for acquisition that satisfy the criteria for the EG ACE mandate.

EG ACE will be opened to further investment for the next 12 months, targeting up to an additional $500m.

According to The Australian, EG has been stepping up its funds management operations and in April won the Tasplan Superannuation Fund as an investor in its High Income Sustainable Office Trust with a $50m commitment.

That fund targets office assets with low National Australian Built Environment Rating System energy ratings that can be repositioned.

The group’s existing funds have also been active with a major Brisbane development site that can sustain either an offer tower or apartment block picked up in April from tycoon Lang Walker.

Last year, EG more than doubled its money on a B-grade Melbourne office tower, 277 William Street, after selling it to one of Hong Kong’s richest families (the Fu family’s KHI Holdings Group) for $93.88 million.

It also sold a 1.3-hectare industrial site fully leased to Veolia Environmental Services for $20.9 million last year to a Sydney high net worth investor on a passing yield of 4.92 per cent. The deal generated a return on equity of 39 per cent.

Among its more recent deals, EG bought a large industrial property in Glen Waverley in Melbourne’s south-east for $33.3 million in October.

In August last year, EG Funds Management kicked off a $150 million equity raising for its fund that turns less environmentally friendly properties into ones green enough for the federal government to lease.

Founded in 2000 by property veteran Michael Easson and brothers Shane and Adam Geha,  EG has $2.4 billion in assets under management with investments spread across half-a-dozen unlisted funds.