M&G’s fund makes first investment in Southern Europe

M&G's fund makes first investment in Southern Europe

M&G Real Estate has acquired a residential development on Bilbao’s sought-after Zorrotzaurre Island on behalf of its European Living Property Fund for €98m via a forward funding deal.

Launched in January this year with circa €600 million of investment, it aims to provide institutional investors with attractive risk adjusted returns through investment into Europe’s residential sectors.

The a29,000 sq m (312,000 sq ft) development comprises 314 high-quality private rental apartments split across two buildings of 15 and 17 floors. The 1, 2 and 3-bed homes will be built to high sustainability standards, targeting an EPC ‘A’ rating and ‘Very Good’ BREEAM certification and will be ready for occupation at the end of 2026.

The acquisition marks the Fund’s first investment in Southern Europe as it looks to capitalise on a major urban regeneration project taking place in Bilbao. Formerly an industrial area, Zorrotzaurre Island is set to become one of the city’s most desirable locations after its transformation into a well-connected district with an electric tram network, extensive office, leisure, cultural and academic facilities and an abundance of green spaces. Designed by award-winning architect Zaha Hadid, it will be a thriving residential community following the regeneration of the peninsula into a new flood-proof island. Provision has also been made for a significant quantity of affordable housing and development opportunities for non-polluting businesses.

Marcus Eilers, Head of European Residential at M&G Real Estate, says: “This is the Fund’s third deal since launch and sees us diversify into Southern Europe following acquisitions earlier this year in Finland and Ireland. There is strong demand for high-quality living space across Europe and we are building on our commitment to provide homes which have a positive impact on their surrounding communities. We are actively looking at further opportunities across Europe where we can finance similar projects which will deliver best-in-class living space and help to provide resilient returns for our investors.”

Federico Bros, Head of Investment and Asset Management for Iberia at M&G Real Estate, adds: “With strong supply and demand imbalances, low levels of vacancy and one of Europe’s less indebted household markets, the Spanish residential sector offers strong fundamentals for institutional, long-term investors. Research estimates that around 2 million new homes are needed in Spain1, of which around 140,000 are required in the Basque Country. Bilbao leads household growth in the region, with more than 23,000 new households expected to be created in the city in the next 15 years.” 

Click here to receive CRE Herald’s weekly newsletter, news alerts and insights!