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Towers Watson maiden JV yields stellar return

A stock market filing by London-listed partner First Property Group shows that the first investment made by advisory firm Towers Watson as sole institutional partner has heralded a 53 percent return on equity and 98 percent IRR.

Towers Watson, the global professional services firm, has registered a stellar return from its first joint venture investment made as the sole investment partner, according to a stock exchange filing by its investment management partner.

In the release by London-listed property investment firm First Property Group, the partners recorded a 53 percent return on an un-geared investment of £30 million (€41 million; $44.7 million) made to buy offices in the UK, then convert their use and sell them. The quick turnaround of the investments meant the partners achieved an extraordinarily high IRR of 98 percent.

The returns are from eight sales by First Property and Towers Watson made on behalf of their partnership, called Fprop PDR.

The returns mark a successful first foray by Towers Watson where its group of clients was the sole investor in a strategy. The advisor, which is has more than $20 billion of capital for real estate investments worldwide under advice, traditionally has invested alongside other institutional investors in funds or other commingled investment vehicles.

Paul Jayasingha, global head of real estate at Towers Watson, told PERE: “We'd always teamed up with managers before, often to seed a fund or be a substantial investor in a fund. But this is the first time we've exclusively worked with a manager and asked them to structure something exclusively for our clients.”

Describing this UK strategy as “a very niche opportunity”, he said the small scale of the assets subject to what is a temporary window for converting old offices into higher value residential was regarded as not compelling enough for certain managers. “But FProp were planning this even before us.”

He said: “There's a window of opportunity where you can buy very cheap government offices and convert them into higher value residential. The value gap or differential was huge. It was a window of opportunity where you had to move quickly.”

“The interesting thing is that most people assumed Towers Watson only do big deals because our clients tend to be quite big. But we're also interested in niche, active opportunities.” Nevertheless, he confirmed that the advisor would be willing to look at similar themed opportunities for both its discretionary and advisory capital of far bigger scale.

“Scale is not the ambition, it's more about price and risk-adjusted returns. That said, we could, theoretically go up to $1 billion but that depends on opportunity and client willingness.”