The Wellcome Trust, a London-based global charitable foundation with about £14.5 billion (€18 billion; $23.5 billion) of assets, has formed a joint venture with a public UK property company to develop regeneration sites.
Wellcome, which already owns a £1 billion portfolio of residential property in the UK, much of which is in London, has teamed up in the joint venture with Berkeley Group, a well-known housebuilder. The pair said in a statement that the JV called St Katherine would initially be worth up to £400 million (€463 million; $614 million). Wellcome will supply the equity to the new vehicle, while Berkeley will be akin to the operating company by sourcing the land and developing the assets.
Peter Pereira Gray, managing director of the investment division of Wellcome said in a statement: “This joint venture will have access to new, long-term, patient capital.” He added: 'We will be opportunity-led, bidding at the right time for sites that would not otherwise be viable and turning them into fantastic places. It is good news for the UK housing market.”
The JV is in keeping with Wellcome’s current approach to property investing. It used to be an active limited partner in property funds, however, since the global financial crisis of 2008 it has tended to go direct instead. Its annual report published in December said direct property holdings accounted for more than 75 percent of its property portfolio.
In a passage about real estate investments, Wellcome noted that the difference in performance between its directly-owned assets and its fund investments “grew even more extreme” in 2011 to 2012. “We have not allocated to external property funds since 2008 and note that many of these funds have been impacted by challenging markets and management of leverage,” it stated.
“Across much of Europe, including the UK, excessive lending by banks to real estate and excessive borrowing by owners was the major cause of the financial crisis and remains largely unresolved. Banks have become active in disposing of their non-domestic real estate interests, but zero interest rates have enabled them to extend domestic loans even where the value of loans significantly exceeds asset values.”
The Wellcome Trust’s residential investment portfolio, which includes a large estate in Kensington, west London, was the star performer of the investor’s portfolio. It returned 18 percent in the latest financial year. Over 10 years, the residential portfolio has returned 274 percent, while direct commercial investments have returned 264 percent.