Investor appetite for distribution warehouses drives property fund’s £42million first close

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Aston Martin’s 230,000 sq ft warehouse at Wellesbourne was funded by Barwood Capital’s 2009 Fund and developed by db symmetry

The continued investor demand for exposure to the UK’s distribution warehouse market has enabled Barwood Capital, the Northampton-based real estate investment and development business, to exceed its first close target for its 2017 UK regional property fund (“the Fund”).

The Fund, which will focus on property assets in the UK’s prime regional markets outside London, achieved its initial close on 25 May 2017 with £42 million raised mainly from high net worth individuals and family offices as well as a material investment from Merseyside Pension Fund. It will be invested in sites with the potential for significant value to be added through planning, development and asset management. A similar sum is expected to be raised in further closes during the next few months. With leverage, the Fund will have a potential buying power of £150 million.

Joanna Greenslade, managing director, Barwood Capital said: “Our investment strategy has resonated with our investors due to its focus on adding real value and creating prime commercial properties with strong income streams which we can then sell into a buoyant investment market. We have over 20 years’ property development experience with particular emphasis on industrial and logistics. This sector was the best performing commercial property subsector in 2016 and is widely regarded as having the strongest growth prospects across all sectors over the next five years. This is driven by the unprecedented occupier demand we are seeing for distribution warehousing due to the move to online retailing as well as structural changes in the supply chain across all sectors changing the way we buy and are supplied with both raw materials or finished goods.”

The Fund will be Barwood Capital’s fourth regional property fund. Around 50% of the equity in the last three funds was allocated to logistics and industrial properties; in the 2017 Fund, it is expected to reach around 70%. The balance will be invested in alternatives and selected regional offices in high growth and undersupplied locations with a limited allocation to small residential sites where housing demand continues to far outstrip supply.

Joanna added: “Shrewd investors are increasingly aware of the prospects in the logistics sector and are looking for ways to access this valuable market with a proven operator. Our investors have taken comfort from our strong track record in delivering outstanding returns and appreciate the personal service with which we provide them. By adding value to properties we also create a cushion of profit which protects our investors.”

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.

Barwood Capital delivered a 12% IRR to investors from its 2009 Income Fund and is expecting to deliver in excess of its 15% target IRR to investors from its 2012 Growth Fund by the end of 2017.  Barwood Capital’s third fund was raised in June 2015 and is fully committed, with one of its assets, a 55,000 sq ft warehouse in Crawley, already having been developed and sold within two years of the initial fund raise.