German investors still see upside potential in UK market
29 September 2010
Despite the solid bounce in London commercial property values over the last year, cross-border specialist Invesco Real Estate has found that there is still plenty of life and appetite left among German investors for exposure to the UK market. It has just had its launch and first closing on its third tactical UK real estate fund, investing directly on behalf of German-speaking institutional investors targeting the UK.
The Luxembourg-domiciled fund completed its first closing just before the end of August with initial capital of €75 million (about £62 million) from four German institutional investors. With a maximum gearing of up to 60%, the fund provides Invesco with about €180 million (£150m) of initial spending capacity. Subsequent closings are expected to take place over the next 12 months.
As with the two predecessor funds, the new UK fund will focus on investing across all commercial property sectors of office, retail and industrial, and geographically across London and established locations within the UK regions. The fund will have a three-year investment period with a planned lifespan of 10 years and is an income return based fund, (i.e. it needs to actively asset manage the properties in order to increase capital values).
Toby Simon, director of fund management at Invesco Real Estate, painted the launch in a very positive light: "We believe now is the right time to re-enter the UK market and access the opportunities that are available by capitalising on the expected rental growth in the London market as well as other opportunities that exist to take on assets with slightly higher risk related to vacancy and refurbishment, where recent pricing corrections have been less aggressive. While there has been a recovery in UK pricing during 2009 and 2010, values remain well below the long term trend levels and, in our view, continue to offer attractive opportunities as the rental cycle bottoms out."