F&C REIT seeks up to £300m for UK commercial property fund

F&C REIT, the major property asset management business formed by the merger of F&C Asset Management's property division and REIT Asset Management last year, has today revealed details of its first fund launch.

The group is seeking to raise £300 million in commitments from institutional and high net worth investors for a proposed UK real estate opportunity fund. The Devonshire UK Opportunities Fund, will invest primarily in UK commercial real estate assets that are available via distressed situations and benefit from significant price discounts, strong underlying real estate fundamentals and where the potential may exist to add further value through active asset management. The fund will be closed-ended and structured as a limited partnership.

F&C REIT, which manages approximately£7.6bn of assets, believes that the current market dynamics are generating unique investment opportunities in the UK property market. The group recently secured a landmark deal for its clients, acquiring a portfolio of 211 properties formerly owned by the Dawnay Day group, with long term financing attached.

Currently, the UK property market offers a unique opportunity to buy stock at prices which are down 40% from peak levels on average and are now priced at attractive yields. The credit crisis has limited the number of buyers able to take advantage of this and has also restricted the options for vendors. The need to sell to fund redemptions or to avoid covenant breaches is expected to provide opportunities from range of vendors spread across all sectors of the property market. F&C REIT believes that the fund will potentially appeal to international, as well as UK investors, given current exchange rates.

The Devonshire UK Opportunities Fund will target an annual gross internal rate of return (IRR) on its investments in excess of 20% over a projected seven year holding period.

The fund will be managed by a team led by Leo Noé who has more than 30 years of experience in the UK property market and co-founded REIT Asset Management in 1997. It has already secured seed capital of £15million in addition to a further £1 million committed by the investment team. The minimum subscription to the fund will be £10 million. J.P. Morgan has been appointed as placement agent for the launch.

Leo Noé, Chairman of F&C REIT and lead manager of the Devonshire UK Opportunities Fund said: "The launch of the fund clearly shows the strong position that F&C REIT is in to take advantage of the current state of the property market; in being able to identify and target opportunities across a variety of sectors that have arisen through distressed assets sales.

F&C REIT has been operating for less than one year and already we have completed the largest property deal of 2009 with the acquisition of the Dawnay Day portfolio. We believe that our new fund represents another great buying opportunity for our clients."

Nick Criticos, Chief Executive Officer of F&C REIT commented: "The new fund will offer investors a unique combination of institutional fund management expertise combined with a direct access to one of the leading entrepreneurial property investment teams in the UK."

"Our team has a long and in depth knowledge of the market and has operated successfully through all phases of property market cycles, and we believe it is well positioned to take advantage of the current market distress."