Kames Capital is launching a second version of its closed-ended UK Active Value Property Unit Trust with £50 million seed investment from West Midlands Pension Fund.
The launch of the seven-year closed-ended Active Value Property Fund II, follows the success of its first, the UK Active Value Property Unit Trust, which raised £275 million. It will follow the original fund’s investment strategy, targeting the good quality secondary commercial property market, particularly those properties in the £5m to £15m price bracket.
Kames, which has been running its Active Value strategy for nearly seven years, believes the result of the EU Referendum is leading to high levels of volatility in the UK commercial property market, which in turn is providing opportunities for active investors to acquire good-quality secondary assets. It also believes that outside of the prime London markets it is possible to add value for property investors by picking good quality assets, which offer attractive income returns whilst also offering good asset management potential with a view to enhancing the value of such assets.
The latest closed-ended fund will be managed by Philip Bach, supported by the Kames property team. Bach has an outstanding network of property contacts, as well being highly experienced in delivering asset management initiatives, something Kames believes is essential for such a fund to be a success.
The new fund will aim to raise £250m and will have a target distribution yield of c.6.5% pa gross of AMC (paid quarterly).
Commenting on the investment, Mike Hardwick, Head of Alternatives and Fixed Income for the West Midlands Pension Fund, says: “The UK secondary property market offers an attractive and stable income yield and provides an effective complement to our existing core real estate holdings. We were attracted to Kames Capital’s active value approach and the depth and quality of the team behind the new fund.”
Bach says: “Following the success of our first closed-ended fund which we launched in 2013 and raised £275m, the UK Active Value Property Fund II aims to capitalise on the current opportunities we believe are newly available from the fallout of the Brexit vote, available outside of the prime London hotspots. We think there remains a lack of supply for good quality properties outside of London after the last property cycle.
“The fund will continue to look to purchase properties in the £5m to £15m price bracket which we believe are too big for most private buyers but too small for most institutional investors. We will then look to maximise the opportunities these properties present either through active management, such as gaining new leases or tenants, or through the refurbishment and redevelopment of the sites.”
Shaun McWilliam, Kames Capital’s head of institutional sales for property, says: “We are delighted that the highly respected West Midlands Pension Fund has agreed to seed the new fund, demonstrating confidence in our property investment team and the continuing investment case for secondary property.”
The new Active Value Property Fund II has a seven year life cycle with the opportunity to extend for a further two. The fund structure is a Jersey Property Unit Trust.
Date: 3 August 2016 Type: Press Release Close
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