LGP reaches first close on second UK property income fund



Legal & General Property (LGP) has held the first close of its second UK Property Income Fund (UK PIF II) at GBP138m from seven investors – the largest first close so far this year for a UK-focused fund.

Including gearing the fund has a total investment capacity or gross asset value (GAV) of GBP224m (cEUR267m).

Drawing on the track record of its maiden UK Property Income Fund (UK PIF I), subscriptions for UK PIF II came from institutions based in the UK, Nordics and Middle East, four of which invested in the first fund. With a strong pipeline of investor interest and a second close expected before the end of 2013, the fund is targeting a GAV of GBP750m, through a series of closings, and is capped at a GAV of GBP1bn.

A closed-ended English limited partnership, the fund will feature off-shore feeder vehicles. It will retain the fund structure of UK PIF I, which allows investors to choose their preferred level of gearing of between zero per cent and 50 per cent loan to value (LTV). The fund will target opportunities that are expected to allow it to achieve a net IRR of eight to nine per cent for ungeared investors and a net IRR of 12 to 14 per cent for geared investors. As with UK PIF I, the fund will deliver a core/core-plus risk strategy over a seven year lifespan.

Supported by a circa 90 person strong dedicated UK real estate team, UK PIF II is led by the same management team responsible for the UK PIF I.

Charlie Walker, director of business development and fund manager of the UK PIF I and UK PIF II, said:

“Representing the largest first close achieved yet this year for a UK focused fund, the high level of investor interest and commitment secured to date is a significant endorsement of the compelling strategy implemented in UKPIF I, leveraging its proven track record of success.

“As a weight of overseas capital continues to drive up the prices of lower risk, prime assets, particularly those located in London, there continues to be a favourable illiquidity discount on larger lot sized properties outside prime. The strategy is positioned in a relatively uncongested space and, benefiting from a strong potential asset pipeline, I look forward to commencing our acquisition programme and continuing to build investor commitments during 2014.”

Reaching final close at the end of 2011, UKPIF I secured a total of GBP300m of equity from 14 major international institutional investors based in the Middle East, Denmark, UK, France, Finland, Switzerland and Japan. With assets under management currently totalling GBP430m, following the acquisition of the FIX Portfolio for GBP115.9m at the start of this year, UKPIF I is fully invested. Other properties within the portfolio include 1 City Place in Gatwick, The Meadows Shopping Centre in Chelmsford, Fremlin Walk Shopping Centre in Maidstone, Guildford Business Park and the Co-op distribution centre in Andover.