UK - Sovereign Land and Strutt & Parker Real Estate Financial Services (SPREFS) are working together to create a £300m (€327m) fund to invest in UK shopping centres.
The Sovereign Land LP fund is understood to have been created to take advantage of lower price, and acquire and manage a diversified portfolio of shopping centres in strong catchments areas.
Officials say the fund's assets will invest in shopping centres valued at between £50m and £100m but it is targeting an equity commitment per transaction of £25m.
Chris Geaves, equity partner at Strutt & Parker, said: "We see this as a good point to enter the market to take advantage of market pricing and deliver good returns to our investors. We see market values continuing to fall until the autumn of this year when we predict some stability."
The Sovereign Land LP, which has a target Internal Rate of Return of 15% and requires a minimum investment level of £5m, is a closed-ended fund with a seven-year term.
Sovereign Land and SPREFS have not set a date for opening the fund to investors but said they have already received interest and will start raising money this year from institutional investors including pension funds, fund of funds, insurance companies and high-net-worth individuals.
"I couldn't imagine a more attractive property investment solution for the institutional market," said Philip Ingman, managing director of SPREFS and co-placement agent on the fund.
In a statement today, the firms said they expected the UK retail property market to deteriorate in the short-term and reach a 20-year low beginning in the second half of 2009. As a result, the next three years present the best buying opportunities in terms of value and quality, ahead of a market recovery.
"In past recessions in the UK, and past property problems, retail has always been the first to come back out of a recession, so it leads the other sectors in terms of recovery," Ingman told IPE Real Estate.
He said the fund is focusing on shopping centres in the "more robust" and "defensive" parts of the market, which could generate returns of around 8% through good asset management.
"In the past two years or 18 months, a lot of these centres have needed work. People are fighting problems with debt and a lot of the asset management initiatives haven't been carried out, so I think there are opportunities to increase returns by good asset management and that is what Sovereign should be bringing to this," he said.
Greaves and Tim Binnington, founder of Sovereign Land, will act as advisers to the fund, which has a 2% management fee for investors.
Sovereign Land was founded in 1989 and has made various joint ventures with financial institutions, including Schroder Exempt Property Unit Trust, Threadneedle, GE Real Estate and Credit Suisse.
SPREFS is an independent property investment consultancy for institutional clients, financial advisers and property developers.
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