M&G Real Estate has corralled £125 million ($175 million; €141 million) for its debut value-added fund, PERE has learned.
The London-based firm, known for its core real estate strategies, held a first close this month for M&G UK Enhanced Value Fund, including a “significant commitment” from an unnamed Asian investor.
M&G is seeking investors from the UK, Europe, Asia-Pacific and Canada for the seven-year, closed-end fund. The firm plans to invest £500 million by 2021. With capital from UKEV, M&G is targeting mispriced assets valued between £15 million and £75 million with repositioning potential. The firm’s target size and returns have not been publicly disclosed.
Paul Crosbie, formerly the firm’s industrial real estate head, was recently named UKEV’s portfolio manager. He joined M&G in 2015 after nine years at Rockspring, which is focused on core and value-added strategies.
M&G is branching into the value-added space after a successful track record in core real estate. The firm’s flagship open-ended European vehicle, the €2.7 billion M&G European Property Fund, generated an 8 percent net internal rate of return for the year ending September 30, according to the M&G website. Its UK counterpart, the £761 million M&G UK Property Fund, returned 9.1 percent on a net basis as of September 30.
Despite the uncertainty created by Brexit, including falling office rents in some London submarkets, M&G forecasts 2 percent annual GDP growth for the UK and consequently anticipates myriad real estate investing opportunities in the country.
“We believe the UK’s long-term prospects are still highly attractive, although undoubtedly the next two years of Brexit negotiations will test the UK economy and its real estate markets,” the firm said in a January outlook report. “A gradual [London] recovery is expected in 18 to 24 months, presenting opportunities for experienced investors.”
The firm managed £30 billion globally as of September 30, according to its website.