Legal & General Property, the property arm of British insurer Legal & General, has raised more than £138 million (€165 million; $224 million) for its second UK fund in what it described as the largest first close achieved this year for a UK focused property fund.
The firm announced it has raised the capital from seven 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.
The fund features through which investors have a choice of gearing levels they are exposed to. The “unique solution”, which is intended to appeal to a wide spectrum of international investors, effectively enables them to choose a level of gearing exposure from 0 percent to 50 percent. 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.
The flexibility figured in Legal & General’s first UKPIF fund, which garnered £300 million from 14 investors from the Middle East, Denmark, the UK, France, Finland, Switzerland and Japan. Cushman & Wakefield Corporate Finance acted as the placement agent for the fund. The vehicle currently has £430 million of assets and is fully invested in various office parks, shopping centres and logistics centres.
Charlie Walker, director of business development and fund manager of UK PIF I and UK PIF II, said: “Representing the largest first close achieved yet this year for a UK focused fund, the high level of investor interest and commitment secured to date is a significant endorsement of the compelling strategy implemented in UKPIF I, leveraging its proven track record of success. “
Walker said the fund was benefiting from an evolving mindset among international institutions away from a focus on prime real estate to selected opportunities elsewhere. He said: “As a weight of overseas capital continues to drive up the prices of lower risk, prime assets, particularly those located in London, there continues to be a favourable illiquidity discount on larger lot sized properties outside prime.”