Legal & General Property, the property arm of British insurer Legal & General, has raised £403 million (€554 million; $631 million) in equity for its second UK fund in what it described as the largest fundraising achieved for a UK-focused closed-ended property fund in the last 12 months.
The firm has raised the capital from 16 investors for its UK Property Income Fund (UKPIF II), a vehicle through which it expects to generate core to core-plus style returns over a seven year period.
Investors in the fund came from across the globe, including Asia, North America, Europe and the Middle East, with seven of the 16 having invested in L&G’s UKPIF I, which closed at the end of 2011 on £300 million.
The fund features different investing options through which investors have a choice of gearing levels they are exposed to. The structure effectively enables them to choose a level of gearing exposure from 0 percent to 50 percent.
Half the investors opted to have no gearing at all, favoring a pure property exposure, whereas the other half choose a modest risk exposure, with levels ranging from 20 percent to 50 percent. This has given L&G a total buying power of £610 million for UKPIF II including gearing.
Accordingly, returns are expected to be net IRRs of 8 percent to 9 percent for ungeared investors and 12 percent to 14 percent for geared investors.
To date, the fund has acquired two properties totalling circa £213million: Priory Court and Temple Court in Birmingham and the Overgate Centre in Dundee, Scotland.
Charlie Walker, director and fund manager of UK PIF I and UK PIF II, commented: “The UK Property Income Fund model has continued to prove popular with investors, due to both its innovative answer to accommodating varying investor appetites for leverage as well as the ever popular desire for income producing properties.”
“We will continue to deploy the final capital into attractive UK acquisitions, in line with the fund strategy, and capitalise on the strength of relationships across the occupational and investment markets, which are always key to our success.”