L&G targets EUR 1b UK fund at European investors

Legal & General Property has raised £175 mln (almost EUR 200 mln) from European institutions in the first close of its UK Property Income Fund. The £1 bn (EUR 1.1 bn) fund is aimed at European investors seeking to take advantage of opportunities in the UK real estate market.

The fund differentiates itself from similar vehicles by employing an innovative gearing strategy and fee structure, the fund manager said. LGP has created a debt structure which enables both geared and ungeared subscriptions 'providing investors with flexibility to select their optimal appetite for risk'.

LGP said it is believes that this is the first property fund offering investors the opportunity to select an individual level of gearing. The fund is targeting returns of 15% geared and 10% ungeared per annum net of costs over a seven-year term.

In line with more 'private equity' style funds, a number of LGP personnel will invest private equity into the UK Property Income Fund to offer ‘exceptional levels’ of alignment of interest between the fund's management team and investors. Performance fees will only be payable on the fund's expiry and subject to a pre-determined hurdle rate.

The fund aims to achieve a gross asset value (GAV) of £500 mln in the first half of this year through a series of closings, with a cap at £1 bn GAV.

LGP, the property fund subsidiary of Legal & General Investment Management in the UK, said the vehicle will generate returns by acquiring buildings with strong and stable income streams, with selective active asset management opportunities in the medium term. The fund will seek well-located assets, with lot sizes between £50 mln and £100 mln, in the office, retail and industrial sectors.