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East Capital launches new property fund targeting Russia

East Capital Private Equity has launched a new fund to invest in shopping centres and retail real estate in regional cities in Russia, as well as in Ukraine and Kazakhstan.

East Capital Private Equity has launched a new fund to invest in shopping centres and retail real estate in regional cities in Russia, as well as in Ukraine and Kazakhstan. The East Capital Russian Property Fund is a closed-ended fund targeting qualified investors with an initial target size of EUR200m.

The fund’s strategy is to invest in cash flow-generating shopping centres and other types of real estate that will gain from strong domestic demand and continued growth in the retail market. Its geographical focus is fast-growing regional cities with more than 500,000 inhabitants. The economies of the target region have been significantly outperforming the economies of developed markets, and there is strong potential for further catch-up growth.

‘Our local presence and expertise and the extensive network that we have built up investing in these markets over the past 10 years will be of great value as we primarily seek to invest in attractive properties unavailable to mainstream investors,’ says Kestutis Sasnauskas, chief executive of East Capital Private Equity and co-founder of parent group East Capital.

The fund aims to develop a well-balanced portfolio of quality assets with respect to location, market and tenants, and its financial target is to achieve an unleveraged internal rate of return exceeding 15 per cent. East Capital expects the fund to begin its investment activities in the course of the summer.

‘We will invest in properties with attractive yield potential and through active management improve commercial concepts and tenant mix, customer flows and efficiency,’ says Biljana Bozic, head of real estate at East Capital.

The group has a dedicated real estate team based in Moscow and Stockholm with extensive experience of real estate investments and development in Russia, Ukraine, the Baltic states and Western Europe.

The East Capital Russian Property Fund is a closed-end fund, structured as a Swedish limited liability company. It has a seven-year term with possible extensions of up to three one-year periods.

Investors have the choice of investing directly in the fund or through an investment vehicle. Direct investors in the fund must commit a minimum of EUR1m to the fund, while the minimum investment in the investment vehicle is EUR50,000. Carnegie Investment Bank will co-ordinate the purchase and sale of interests in the investment vehicle shares by facilitating over-the-counter market activities.

East Capital is an independent asset manager specialising in Eastern European financial markets. The company, which is based in Stockholm with offices in Paris, Hong Kong, Tallinn, Milan, Vienna, Moscow and Oslo, had more than EUR4.4bn in assets under management at the end of May, including some EUR135m invested in the real estate through investment in 29 properties and 14 companies in the sector.

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