F&C REIT is seeking to raise £300 mln (EUR 336 mln) in commitments from institutional and high net worth investors for a proposed UK real estate opportunity fund. The Devonshire UK Opportunities Fund will invest primarily in UK commercial real estate assets that are available via distressed situations and benefit from significant price discounts, with strong underlying real estate fundamentals and where the potential may exist to add further value through active asset management. The fund will be closed-ended and structured as a limited partnership.
F&C REIT is seeking to raise £300 mln (EUR 336 mln) in commitments from institutional and high net worth investors for a proposed UK real estate opportunity fund. The Devonshire UK Opportunities Fund will invest primarily in UK commercial real estate assets that are available via distressed situations and benefit from significant price discounts, with strong underlying real estate fundamentals and where the potential may exist to add further value through active asset management. The fund will be closed-ended and structured as a limited partnership.
F&C REIT, which manages approximately £7.6 bn of assets, believes that the current market dynamics are generating unique investment opportunities in the UK property market. The group recently secured a landmark deal for its clients, acquiring a portfolio of 211 properties formerly owned by the Dawnay Day group, with long term financing attached.
Currently, the UK property market offers a unique opportunity to buy stock at prices which are down an average 40% from peak levels and are now priced at attractive yields, the company said. The credit crisis has limited the number of buyers able to take advantage of this and has also restricted the options for vendors, it added. The need to sell due to fund redemptions or to avoid covenant breaches is expected to provide opportunities from range of vendors spread across all sectors of the property market. F&C REIT believes that the fund will potentially appeal to international, as well as UK investors, given current exchange rates.
The Devonshire UK Opportunities Fund will target an annual gross internal rate of return (IRR) on its investments in excess of 20% over a projected seven year holding period.
The fund will be managed by a team led by Leo Noé who has more than 30 years of experience in the UK property market and co-founded REIT Asset Management in 1997. It has already secured seed capital of £15 mln in addition to a further £1 mln committed by the investment team. The minimum subscription to the fund will be £10 mln. J.P. Morgan has been appointed as placement agent for the launch.
