Moorfield holds initial close for ‘beds and sheds’ fifth fund

The UK-focused manager has already collected half its hard-cap in what could be its largest fundraise yet.

Moorfield Group, a London-based, UK-focused real estate fund manager, has raised more than half its hard-cap in the first close of its fifth diversified value-add vehicle, Moorfield Real Estate Fund V, PERE has exclusively learned.

The firm has raised £270 million ($365.5 million; €319.7 million) since launching the fund last summer, with capital coming from eight investors, including two new ones, from Europe, the US and Japan. The fund is targeting £350 million with a hard-cap of £500 million, with Moorfield expecting to complete the capital raise this year, chief executive Marc Gilbard tells PERE.

Fund V is already the third-largest vehicle for Moorfield, whose biggest fundraise was the £389 million Fund II, followed by the £284 million Moorfield Audley Real Estate Fund, according to PERE data.

Moorfield is continuing to employ its ‘beds and sheds’ strategy, with around 65 percent of the latest vehicle slated for residential and the remainder for industrial, logistics or self-storage, chief investment officer Charles Ferguson-Davie confirms.

The firm is looking to invest in the residential for-rent sector in the UK, both multifamily and single-family, as well as student housing, logistics and self-storage. Moorfield will both acquire and develop assets in an effort to capitalize on major supply and demand imbalances in the UK market across its chosen sectors, partly because of the maturity of those property types relative to other global markets.

“Residential for rent is the largest real estate market in the UK [and] this has been predominantly owned by ‘mom and pop,’” Gilbard says. “Professionalizing that is a huge opportunity.”

Gilbard says the fund will look to raise capital to match the opportunity set, with hitting the £500m hard-cap not necessarily the goal

On the logistics side, Ferguson-Davie says the firm is aiming to amass portfolios by acquiring single-tenant assets because of the limited supply in the sector. Self-storage, meanwhile, offers a bigger growth opportunity, with the UK not having as many units per capita as other countries, Ferguson-Davie adds. It has partnered with Storage King, an operator brand run by South African REIT Stor-Age, to enhance its operational expertise.

“We think that having a best-in-class operator will help us deliver better results,” Ferguson-Davie says.

All these choices play into the macro theme of inflation. While real estate is broadly considered correlated with inflation, Ferguson-Davie notes that the retail and office sector, for example, are not. Residential, among others, does because of its short leases leading to repricing, he adds.

“We think it’s very important in this climate to be investing in subsectors that will show some correlation with inflation,” Ferguson-Davie says. “Because of the nature of the occupier, we think that student, healthcare, logistics and self-storage will also have good linkage to inflation as well.”

Moorfield is targeting around a 15 percent net internal rate of return and 1.5x equity multiple for Fund V, in line with its expectations for other funds. Across its previous investments, the firm has achieved a weighted average 26 percent IRR and 1.5x multiple. Moorfield’s previous funds have exceeded their targets, according to PERE data. Fund IV, for example, raised £220 million against a £200 million target.

“We are not a business that tries to raise as much capital as it can,” Gilbard says. “Without feeling the weight of capital on our shoulders, we want to invest selectively. That will result in how much we ultimately raise in the fund.”