Frogmore, the London-based private equity real estate firm, has hit the marketing trail for its fourth fund.
The UK-focused firm declined to comment but it is understood that senior executives have visited the US in the past few weeks with a view to raising capital for Frogmore Real Estate Partners IV, the latest in its flagship series of value-add funds.
A fundraising cap of £500 million ($666.5 million; €570.6 million) is thought to have been set for the blind-pool, commingled fund, a number that significantly outreaches the £400 million raised for predecessor fund, FREP III, in July 2015. With that fund’s investment period reaching its end, the firm has reached a stage where it can fundraise again.
The strategy for Fund IV is expected to mirror Frogmore’s previous funds. Fund III was deployed into a range of UK property sectors including London residential and retail, logistics in UK regional areas and retirement homes. While it is early to measure that vehicle’s performance, Frogmore’s second FREP fund, which garnered £195 million, is 90 percent exited and has generated a gross internal rate of return of 28.2 percent and 1.8x equity multiple.
Year Fund Equity Return
2006 FREP I £330m 0.95x
2013 FREP II £195m 1.8x
2015 FREP III £400m TBC
2018 FREP IV £500m* TBC
* target cap
According to PERE’s previous coverage, one deal for that fund, a loan to residential property company Dorchester Group, generated a 33 percent IRR and 2.5x equity multiple; another, a residential retirement parks portfolio called Brittania Parks, generated an IRR of 37.5 percent and 2x equity multiple.
Frogmore’s first FREP fund collected £330 million in 2006, shortly before the global financial crisis. Alongside other funds of that vintage, it did not perform as expected – PERE understands it returned 0.95x of the equity.
Frogmore’s investors in the past have included a number of US pensions, including California State Teachers’ Retirement System, North Carolina State Treasury, Maryland State Retirement and Pension System and Arizona Public Safety Personnel Retirement System.
Frogmore is raising capital after a strong year in terms of performance for UK commercial real estate. According to a report published earlier this year by the bank UBS, the 2017 all-property total return for the country was 10.3 percent, higher than forecast. At PERE’s UK roundtable, published this month, participants agreed such a return was unlikely to be maintained as doubts about the country’s economy in the year before Britain’s departure from the EU intensifies.
HFF, the Dallas-based capital advisory firm, is assisting Frogmore with this latest fundraising effort. The mandate is understood to be the firm’s first equity raising role for a fund manager in Europe. Since opening an office in London in 2017, HFF has worked mainly in real estate credit markets.