Friday Letter Curzon deal lights up UK

In cricket, the incoming batsman always feels a sense of relief at “getting off the mark” with a run. It’s the same feeling for private equity firms making their first investment in a new cycle.

London-based Curzon Global Partners experienced that sense of relief this week when it struck its virgin UK deal by acquiring a £139.3 million (€173 million; $255 million) portfolio of retail and office property from institutional investor PRUPIM.

For Curzon, which made the acquisition in conjunction with another opportunity fund managed by Mountgrange Capital, the deal came three months after it closed its European Property Investors Special Opportunities Fund on €800 million of equity. Three months is a relatively short space of time in real estate, but given that market practitioners have been declaring the UK a very attractive place to buy real estate at bargain prices since at least the turn of the year, it shows a credible degree of discipline.

While there are a small handful of UK-focussed opportunity funds that have been fairly aggressive in acquiring property, the list of funds that have stayed out or are just beginning to come in is far far longer. Rockpoint, Delancey, Curzon, Mountgrange and Brockton Capital are all on it. In the case of London-based Brockton, it has been analysing opportunities since its last UK purchase in 2006 and only re-entered this summer with pub acquisitions – a long absence especially if you consider the firm’s chosen mandate of investing in real estate in Britain.

This suggests that private equity real estate firms have been disciplined in their pricing of assets and consequently their decision to buy. There are various buzz words being used to describe the approach, with ‘considered’, ‘patient’ and ‘disciplined’ among the most common. But now it seems that even the more conservative among these firms are starting to feel as if the stars are lining up for them.

The banks, for example, have up until now been patient with their loan books but are beginning to selectively work out their problem investments. That they are only now deciding to act decisively in piece-meal fashion may not please forecasters who predicted a sudden avalanche of opportunity. However, all the signs are that there is a lot more to come in the UK, from banks and other types of vendor, and that the opportunity funds will be getting a lot busier. To borrow from cricketing parlance once again, opportunity funds have got their eye in and are looking to score heavily.