The 6 Biggest Funds Raising Capital For The U.K. And What They Say About The Market
Raising capital for funds targeting the U.K. is a tricky business at the moment.
At the core end of the market, prices are still high, underpinned by interest in London offices from Asian buyers.
And for opportunistic buyers, in spite of the market dislocation created by Brexit, secondary assets have not yet repriced, with sellers still looking for the high prices of yesterday.
Still, fundraising remains pretty robust, according to specialist private equity firm Preqin — £3.5B has been raised year-to-date for the U.K., behind the run rate that saw £7.2B raised in 2016, but on a par with the £5.2B raised in 2015.
So what kind of funds are being raised to deploy in the U.K., and who is raising them?
Two of the biggest funds in the market for capital are the AgFe Real Estate Senior Debt Fund II and AgFe High Yield Real Estate Senior Debt Fund, which are targeting £800M and £400M of equity, respectively. AgFe is one of the most successful debt fund managers in the market, and raised the largest-ever U.K.-only fund with the first iteration of its senior debt fund. With the prospects for the U.K. less certain and global interest rates low, senior debt is seen as a lower-risk way for institutions to access the market compared to buying core property. None of the biggest funds in the market are targeting prime property.
Another debt fund. The ICG-Longbow UK CRE Senior Debt Programme Vintage IV is looking to raise £500M, likely to provide whole loans to more risky properties across the U.K, as it has done with previous funds. As well as the risk protection provided by being further down the capital stack, debt funds are becoming an increasing part of the U.K. lending market because regulation is curtailing the ability of banks to provide higher loan-to-value loans.
Safeguard Real Estate Management
Singaporean Safeguard is the only non-U.K. name on this list, and it is targeting opportunistic returns from buying into the U.K. student accommodation sector, which has become a mainstream asset class in recent years, and will get higher returns by undertaking development. It is looking to raise £500M for the SafeGuard Global Accommodation Real Estate Fund.
TH Real Estate
TH Real Estate is looking to raise £400M for its Global Real Estate Debt Partners - Fund II (UK), in an example of how even managers who are not debt fund specialists are looking to the debt sector as the best way to access the U.K. market. The fund is a follow-on from TH’s first U.K. debt fund, which raised £300M for senior lending.
The manager raising the largest general opportunity fund in the market is not looking to pick off distressed assets, as is usually the case with such funds. Instead, Moorfield will look to hit higher returns by focusing on three sectors: student accommodation, build to rent and last-mile logistics. It is looking to raise £400M for Moorfield Real Estate Fund IV.