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Opportunity Funds Are Starting To Get Their Groove On Again In The U.K.


For a long time the U.K. has been a bit of a paradox for domestic opportunity funds.

Prices did not drop as expected after Brexit and values remain near all-time highs in some sectors. That limited opportunistic purchases. But expectations of economic growth did fall, and it is predicted rents will drop, so it was hard to confidently invest based on expectations of rental growth or filling vacant space.

Most value-add and opportunistic investors invested in the growth markets of Continental Europe if they could. For U.K.-only players it was tough to raise and deploy capital.

But things seem to be turning. Last week Clearbell announced it had raised £310M for its U.K. value-add fund, which was looking to capitalise on various strategies.

In the toughest of all sectors, regional retail, Ellandi announced it had raised £100M of equity from Deutsche Finance International, which last year bought the Olympia Exhibition Centre. When debt is added it will have £200M to buy secondary regional shopping centres.

According to data complied for Bisnow by Preqin, fund managers are in the market looking to raise £3.75B of equity for U.K. funds targeting value-add and opportunistic returns. Well-known names Frogmore and Moorfield are looking to raise £350M for generalist value-add funds.

Clearbell said it had already allocated £110M of the equity from Clearbell Property Partners III. It said the fund will have five strategies:

    • Cash-on-cash: exploiting the wide gap between property yields and interest rates, especially in the logistics and industrial space.
    • Evolution of retail: capitalising on the rise of delivery to acquire retail logistics including creating aggregated portfolios.
    • Recovery assets: sourcing good quality assets requiring capital investment.
    • The reverse ripple: pursuing London office markets where value is starting to emerge post-EU Referendum.
    • Beds: opportunities in residential and leisure accommodation due to lack of supply.

“The headwinds have been very strong, but we have navigated these to achieve a successful raise,” senior partner Manish Chande said.