23. April 2018
Peakside and KD launch Slovenia’s first regulated Alternative Investment Fund
Peakside Capital, an international real estate investor, and KD
Funds, one of the oldest asset managers in South East Europe
(SEE), have made the maiden acquisition for Slovenia’s first
regulated real estate Alternative Investment Fund.
KD Adriatic Value Fund has commitments from regional institutional investors
and has a current buying power of more than €50 mln. The fund has acquired
its first asset, the Tivoli Center in the Slovenian capital Ljubljana.
The Tivoli Center was purchased for €13 mln, reflecting a net initial yield well
in excess of 8%. Located in downtown Ljubljana, the Class A property
provides 8,000 m2 GLA across two connected buildings. Some 97% of the
space is occupied by long-term tenants with strong covenants. Current
tenants include international law firms, as well as a diversity of various
successful SME companies.
Stefan Aumann, managing partner and founder of Peakside Capital: 'The
acquisition of Tivoli Center is an excellent start for the Adriatic Value Fund. We
are very happy to have acquired a prominent building that is in demand from
occupiers and is located in a prime location within the growing Ljubljana office
market. This is a stepping stone in establishing a larger portfolio in the region
that will offer attractive returns to the fund's investors.'
Luka Podlogar, the president of the management board of KD Funds, said the
fund and its first deal staked a claim by KD and Peakside to be 'pioneers of
development in the real estate fund sector in Slovenia. 'By way of this venture,
we are fulfilling the KD Funds' strategy in practice, namely to expand our
product range of successfully managed funds for retail investors, by adding
alternative investment funds for institutions,' he said.
KD Adriatic Value Fund, Special Investment Fund, is a seven-year alternative
investment fund managed by KD Funds, with Peakside Capital acting as
investment advisor. Its investment objective is to generate returns for
investors from rental income and capital growth through investments in real
estate in Slovenia, Croatia and Serbia, with a special focus on office and retail
The three target countries represent a region with a relatively undeveloped
real estate sector and attractive returns, whilst the long-term success of the
fund is further supported by strong economic growth, according to
Peakside and KD.
Peakside and KD plan to grow the fund to €50 mln within the next 3-4 months
as there are two more properties in the immediate pipeline. This will give
institutional investors a proof of concept and will form the basis for a second
marketing push. The focus will be on local institutional investors; their
counterparts in Germany and family offices.
KD Adriatic Value Fund will seek to acquire single assets or small portfolios
over an 18 month to two-year investment period. The fund may
invest selectively and opportunistically in logistics to benefit from Slovenia's
location on the east-west and north-south distribution corridor. Croatia also
lies close to the important transportation route. Podlogar said the fund may
also invest opportunistically in the hospitality sector, something that could
enhance the fund's returns.
'The sweet spot for individual investments will be in the €15-25 mln range,
with a total of about 10 assets offering good diversification,' added Aumann.
Based in Slovenia, KD Funds is one of the largest and largest asset managers
in the SEE region. The firm manages about €800 mln, predominantly in equity
fixed income and money market instruments.
'As the yields on fixed-income instruments were dropping continuously, we
decided in 2015 to first start looking at real estate as something that can be
investible for our clients,' Podlogar said.
Real estate as an asset class didn’t really exist in this region, he said. 'Some
institutions tried investing into real estate, but it was all very direct and from
their own balance sheets and always with a lot of problems. There wasn't any
professional real estate asset management available here. In addition, there
was also no investment vehicle suitable for pension funds and insurance
companies seeking access to the real estate asset class.'
Peakside's attraction included that it was 'not a multi-billion dollar manager',
rather a 'highly successful niche asset manager with experience in eastern
Europe and based in Germany. 'The core CEE markets have gone through a
real estate development cycle and have grown to a more professional level.
This has not happened in SEE yet,' Podlogar said.
Aumann noted that SEE real estate offered a significant yield gap compared
to the CEE markets and Western Europe. The few deals in the SEE region in
the last two years have been mainly carried out by South African investors
at relatively high yields. 'This creates an unique opportunity because on the
one hand we had an underdeveloped market and local institutions who are
hungry for real estate. On the other, property in the region can offer a yield
gap of about 200 basis points, he said.
KD and Peakside
Founded in 1994, KD Funds is one of the largest and oldest asset managers
in South East Europe. It manages around €800 mln in 34 funds and 13
investment mandates together with its subsidiaries) across the SEE region,
including the oldest mutual funds in Slovenia and Croatia.
Peakside Capital was founded in 2010 as a spin-off from the Merrill Lynch
investment bank and currently employs about 30 people. It is mainly active in
Germany and Eastern European countries, managing funds and
asset management mandates. It currently has more than €1 bn of gross
assets under management.