Legal & General Property revealed today it had raised £300 million (€344 million; $474 million) for its UK Property Income Fund against what it called a ‘tough fund raising environment’.
The property arm of British insurer, Legal & General, launched the fund in 2010, and heavily marketed its innovative structure which allows investors to choose their preferred level of gearing of between zero and 50 percent loan-to-value.
Legal & General Property said in total it had managed secured commitments from 14 major international institutional investors based in the Middle East, Denmark, UK, France, Finland, Switzerland and Japan. Cushman & Wakefield Corporate Finance in London acted as the exclusive placement agent.
In a measure of just how tough things have become, the company also said it had secured £52 million of equity in the last six months. A statement said this was a “considerable achievement given the tough fund raising environment”.
Charlie Walker, director of business development and fund manager of the UK Property Income Fund, said: “Against challenging market conditions, in which so many have struggled to raise funds, the significant capital raised from this new base of major global institutional investors not only reflects the attractiveness of this innovative fund structure, but obvious appeal of the fund strategy.”
He added: “With a decreasing number of institutional investors competing in the larger lot size segment of the market and a growing supply of chunky, income-producing assets coming to the market, we feel that the UK PIF is strongly positioned to take advantage of short-term mispricing and a lack of liquidity beginning to surface once again.”
Legal & General is hoping to deliver returns of 15 percent for geared investors and 10 percent for ungeared by acquiring large lot size assets, betting it can capitalise on an economic recovery in the UK based on a core/core-plus risk strategy. It said the final split of investors demonstrated demand for both geared and ungeared positions, “demonstrating for some a confidence in applying debt at the lower end of the risk spectrum”, whilst others favoured a pure property exposure. The internationally dominated investor base clearly signifies the global appeal of UK commercial property, added the firm.
So far the fund has invested in £200 million of assets; Fremlin Walk Shopping Centre in Maidstone; Guildford Business Park , Guildford; and, the Co-op distribution centre in Andover.