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UBS terminates UK fund at 18% IRR – Exclusive

The real estate business of Swiss banking giant UBS has formally terminated its central London-focused value-add vehicle, CLOVA, after disposing of a City of London office asset. Portfolio manager Sam Sananes said the achieved internal rate of return (IRR) comfortably surpassed the original target return of 10 percent. 

UBS Asset Management (UBS-AM), the real estate business of Swiss banking giant UBS, has completed the sale of its ninth and final asset from its London-focused office vehicle, UBS Central London Office Value Added (CLOVA) fund.

The firm said the sale of 160 Blackfriars Road, on the edge of the City of London, marked the formal termination of the closed-ended fund which delivered an IRR of 18.4 percent over its five year life, a significant increase on the target return of 10 percent.

UBS CLOVA was launched in June 2011, with a seeding of six properties, and attracted a total of £110 million ($145 million; €129 million) from 22 European and Asian investors. Around 90 percent of these, UBS said, were institutional investors with the remainder being ultra-high net worth individuals.

The firm said the fund was designed to have a short lifespan through what it described as a “predetermined period of forecast exceptional growth”, before selling the assets and returning equity to investors ahead of a downturn in the market.

“Key to the fund's success was a disciplined investment process from acquisition to asset management to sale. The properties were managed in accordance with a pre-defined strategy to reposition each asset from value-add to core, allowing them to benefit from enhanced rental values and improved yield profiles,” a spokeswoman for UBS said.

The assets were spread across a range of London markets, from the established areas in the West End and City of London, to the fast-growing, emerging submarkets of Shoreditch, Southwark and Stratford. 

The first acquisition made on behalf of the fund was in College Hill, in the City of London, in August 2012, while the last purchase was 12 Golden Square (pictured), in the West End, in May 2013. However, the firm did not disclose the sale prices of the respective assets.

Sam Sananes, UBS CLOVA portfolio manager, said the firm decided in April to accelerate the disposal process of the fund’s remaining assets in order to counteract any negative impact arising from the EU referendum. The fund’s final three assets, Sananes said, all exchanged prior to the vote and achieved pre-referendum sale prices, which UBS did not disclose. 

“With this final sale and the termination of the fund, we have achieved everything that we set out to with UBS CLOVA and at the same time, delivered one of the best performing UK funds over the last five years,” said Sananes, 

“Our research-led approach gave us the conviction to launch the fund at the right time in the cycle with a clear investment strategy. This, combined with our investment and asset management capabilities, has enabled us to extract significant value from our investments and distribute very healthy returns to our investors,” he added.