London-based private equity real estate firm Moorfield has created a 50:50 joint venture with London-listed industrial property company Segro to buy the assets of a large UK industrial fund for £314.7 million (€376 million; $492 million).
The firm, launched by Marc Gilbard and Graham Stanley in 1996, announced it had teamed up with Segro to buy the UK Logistics Fund, a fund comprising 14 logistics warehouses across the UK, from sellers Hermes Real Estate Investment Management, Legal & General and LaSalle Investment Management.
Moorfield and Segro will each inject £65 million of equity into the joint venture and the deal is expected to complete by the end of January 2012. Moorfield’s capital is to come from its second private equity real estate fund, Moorfield Real Estate Fund II. The fund attracted just shy of £400 million of equity at the end of 2007. The remaining capital comes in the form of lending from Metropolitan Life Insurance Company and DekaBank.
The deal reflects a net initial yield of 6.3 percent although that is expected to increase to 7.7 percent when two of the unoccupied properties are leased.
The portfolio being sold, also comprising one development site, is spread over 12 locations on or near main arterial roads in the UK, Moorfield said. It totals more than 4.34 million square feet of space let to occupiers including Tesco, Sainsbury’s, GKN Aerospace, Royal Mail, Booker cash and carry and Exel UK and benefits from a weighted average lease expiry of 13.3 years.
Reflecting on the deal, Gilbard said: “The UK market is materially undersupplied with good quality distribution property, yet this is currently one of the few sectors showing growth and rising demand. The portfolio offers us the opportunity to engage with high quality tenants, improve income profiles and enhance value by proactive asset management.”
Originally a publicly-listed company, Moorfield de-listed in 2001 before embarking on a deal-by-deal strategy for a wide array of investors. Early successes led to an average IRR of more than 60 percent and an equity multiple of 2.5x which enabled the firm to gain traction in 2005 for its first private equity real estate fund, The Moorfield Real Estate Fund. That was invested in two years, paving the way for its second fund, Moorfield Real Estate Fund II, from which the firm is still investing.