Barwood Capital targets £75 million and a 15% investor IRR for its fourth UK regional real estate fund

Joanna Greenslade, managing director, Barwood Capital

Barwood Capital, the Northampton-based real estate investment and development business, has launched the Barwood Property Fund 2017 (“the Fund”), a closed ended, five year fund which will exploit the arbitrage between undermanaged secondary commercial property stock and prime income producing investments.

The Fund will have a potential fund size of £150 million with leverage and target property assets in the prime regional markets outside London with the potential for significant value to be added through planning and development expertise and active asset management.

The Fund will focus on lot sizes between £3 million and £20 million in urban logistics and distribution warehouses which are in demand due to the rise in internet retailing, and also selected regional offices in high growth and undersupplied locations in addition to a limited allocation to residential property, developing quality dwellings in attractive locations as housing demand continues to far outstrip supply.

The Fund will aim to deliver investor IRRs of 15% per annum net of all fees over the five year period, with a maximum 50% LTV gearing and a minimum £1 million subscription. Current and target investors are predominantly high net worth individuals, family offices, charities and select institutions, who are looking for the returns and benefits associated with direct investment yet don’t have access to local market knowledge and development expertise.

Joanna Greenslade, managing director, Barwood Capital said: “During the last few months the regional property market has seen a reduction in property values for secondary stock and a focus on quality and income. This has had the effect of reducing prices and competition for the underperforming assets that the Fund will target for acquisition yet maintaining the values in the prime market targeted for disposals. This increasing yield gap between primary and secondary assets currently stands at almost 3.5%. Investors are increasingly seeing this opportunity and to date we have received investor commitments for 25% of our new Fund.”

The Fund will be the fourth to be launched by Barwood Capital since 2009. Its previous 2015 growth fund closed in July 2015 with the ability to secure more than £100m of commercial and residential property assets. It is now almost fully invested. Since 2009, Barwood Capital has delivered net returns to its investors of 12%-20% per annum.

Joanna Greenslade added: “Our directors have built an outstanding track record in delivering above average returns to investors from property development and asset management. Our success is down to sourcing opportunities off market or below market prices, by buying only in prime locations where occupier demand is high and supply is low and by intensively asset-managing existing buildings and planning and developing new ones.”