UK - Legal & General Property (LGP) has secured a further £100m (€113m) of equity for its UK Property Income fund from an internationally diverse group of institutional investors in France, Finland, Switzerland and Japan.
The core real estate fund, which was launched 12 months ago having raised an initial £175m, now has more than £250m in investment capital to invest in income-generating properties in the UK.
LGP sought to attract a wide range of investors by offering a choice of leveraged or unleveraged exposures with different risk-return characteristics.
The fund seeks to generate returns of 10% for the former and 15% for the latter, two-thirds of which will be delivered through quarterly income distribution.
The new commitments have been evenly split between those with gearing and those without, highlighting the capital raising benefits of running a two-tier debt strategy, which has been arranged with German lender Eurohypo.
There have not yet been any indications of other real estate fund managers following a similar approach.
Charlie Walker, fund manager of the UK Property Income fund, said the investment period of the fund had been extended to September 2011 to "satisfy ongoing appetite" for the strategy.
He said: "As one of only a handful of property funds successfully launched last year, this additional equity injection further reflects the high levels of investor appetite for this innovative product.
"Designed to enable investors to access the high returns on offer from investing in larger lot sizes, at an attractive entry point in the cycle, the fund has already secured investment from a considerable number of UK and global pension schemes."
Bill Hughes, managing director of LGP, said: "Raising equity for real estate funds remains challenging. We are aware of many funds in the UK and beyond that have failed to achieve a close, and others that have not grown since modest first closes.
"Recent investor commitments are a further endorsement of the quality of the team and the fund's assets, as well as the flexible gearing structure and strong alignment of interest between investors and the management team. The high distribution yield being paid on the fund has also attracted a number of investors."
LGP has already invested £213m in the market on behalf of the fund, including Fremlin Walk Shopping Centre in Maidstone, Guildford Business Park and a distribution centre at Andover, pre-let to Co-op.
The fund will also concentrate on larger lot sizes assets in well-located office, retail and industrial sectors, demonstrating strong and stable income streams.
