EUROPE - First Property is aiming to move back into the UK commercial real estate market, after concentrating for several years on Central and Eastern Europe (CEE), with the launch of a new vehicle for pension funds.
The company said it was close to securing capital commitments from a number of UK pension schemes in "excess of £50m (€55m) of equity, subject to contract" for the fund.
It would mark a return for First Property, which has been underweight the UK since 2005, when it was deemed prices were becoming too expensive.
In an interim report, chief executive Ben Habib said First Property had been in due diligence with a group of pension schemes and "lawyers have now been instructed to draw up contractual documentation for such a fund".
He added: "These documents are still subject to negotiation and it would be premature to conclude that such a fund will certainly be raised, but considerable progress has been made."
In the intervening years since 2005, the company has concentrated on CEE markets, predominantly in Poland, including a joint venture with the UK's Universities Superannuation Scheme (USS).
The geographic breakdown of First Property's funds under management currently comprises 90% in Poland; 5% in Romania; 5% in the UK.
"We expect these weightings to shift in favour of the UK in the coming months," Habib said.
"In the UK we believe that pricing has fallen sufficiently to compensate for further anticipated rent reductions.
"The occupier market is still weak though, as is the state of the economy, so consequently, like much of our competition, our acquisition focus is on good quality covenants with long unexpired leases," continued Habib.
Alongside First Property's renewed focus on the UK, the company still favours Poland for real estate investments and is aiming to launch a new fund to target the market.
"In Poland, which is the only EU member country to have thus far avoided recession, and where there are lower levels of personal and state indebtedness, the economic outlook is brighter," Habib said.
"As global growth returns, we expect Poland's economy to benefit and for rents to begin to rise, with a commensurate increase in the value of properties."
First Property is looking to invest £9.5m of its own capital into the fund, but is seeking prospective joint venture partners to provide the majority of the funding.
Capital raising is expected to take several months however there has been no suggestion that USS, which has been a joint venture partner in the past, would be investing in the new venture.
That said, Peter Moon, outgoing chief investment officer for USS, will join First Property next year as a non-executive director.
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