The UK government has said it will allow casinos to be turned into residential space – but, crucially, it has not extended existing rules on office-to-residential conversions, which are due to expire in just over a year.

Shortly after announcement, First Property Group revealed it had sold all eight properties it had spent the past 18 months converting from offices to residential, generating a 53% return on equity in the process.

There has been a three-year window to make office-to-residential conversions – an activity that stands to benefit from an overwhelming demand and lack of supply for UK housing, especially in London. The government has said it will “consider” extending the permitted development rights (PDR), effectively putting off any decision beyond the next General Election in May.

First Property’s Fprop PDR fund – backed by a number of investors advised by Towers Watson – was created in October 2013 in response to the PDR changes. First Property ended up deploying £30m of capital for the strategy without gearing, returning £16m to investors.

Perhaps more noteworthy than the investment performance was the way the opportunity was jumped on so quickly by pension funds, often stereotyped as slow-moving investors.

It was the first time that Towers Watson had initiated a fund exclusively for its clients with a real estate manager. Paul Jayasingha, global head of real estate research, said the fund was effectively borne out of a “meeting of minds” between the two organisations that had both spotted the opportunity – and some clients that could move quickly.

Ben Habib, CEO of First Property told IP Real Estate: “We haven’t done a fund for [such] a bespoke, short-term strategy before. That’s not to say we don’t spot trends and jump on them when we see them – but we just don’t tend to do them in specific funds.”

The government’s decision to allow office-to-residential conversions for a three-year period was “the most dramatic policy shift”, Habib said. “I’ve never seen anything as good as this in my working career.”

Habib said First Property has “pounced on” short-term opportunities before, but typically through existing funds with wider mandates or by using First Property’s own cash.

But the clearly defined three-year window provided enough time for First Property and Towers Watson to set up a fund and execute the strategy.

All of the assets have been sold, and both Jayasingha and Habib admit the window is effectively closed. Under current rules, office-to-residential conversions need to be completed by May 2016, making it an increasingly risky venture as time goes on.

“It’s a highly unusual opportunity and we wouldn’t expect to repeat it anytime soon,” Jayasingha said. “But the concept of working with some niche managers on niche opportunities where it’s slightly below the radar is certainly something we are very keen to do.”

Jayasingha was keen to stress that Towers Watson is not “looking at small, niche strategies for the sake of it”. The consultancy is interested in larger-scale strategies too, it just does not want to miss out on “any compelling idea” because of its size.