Managing Partners Limited, a London-based alternative investment manager, is making its first commercial real estate investments via its British Property Opportunities Fund. The fund launched early last year and has typically acquired residential properties in the United Kingdom. It is now expanding its investment to include commercial properties, said Jeremy Leach, managing director. Additionally, Managing Partners sees a number of one-off development opportunities for which it can line up investors.
Managing Partners formed the open-ended mutual fund in response to its belief that the U.K. property market was overheated. Although the company expected to see a decline, it did not anticipate the swiftness of what played out. “The credit crunch expedited the correction dramatically,” Leach said. “We thought it would be a slow burn but it happened very quickly.” Since inception, the fund has only had one month of negative returns and has delivered returns of more than 10% over the past year.
Leach favours the Southeast of England for investments, believing that this region has a better chance of seeing an early recovery than the northern markets, which are more driven by manufacturing. Additionally, it has a greater density of population. “I do think we’ve reached a point where we are seeing resistance to lower offers because we are close to the bottom in the Southeast. In the North, there is further to go,” he said.
Because of the relatively small size of the fund, Managing Partners is seeking smaller properties in the commercial sector. It particularly likes the opportunities in the retail sector and is also talking with small developers that may be underwater on their loans, Leach added. “With smaller developers who have used bank borrowing, if the bank pulls the plug on their overdraft, they can’t buy a bottle of milk. Many of them have good businesses but their cash flow has dried up,” he said.
This article was originally published in Alternative Investment News.