As part of their global diversification strategy, Hermes Real Estate, one of UK’s largest real estate fund managers with £5.8bn ($9.3bn) in assets under management, are set to begin investing in the recovering US commercial property market.
Hermes has agreed to form a joint venture with Hampshire Real Estate, a privately owned US investment company, to launch a closed-end fund, which will target high income-producing commercial real estate.
The venture, – which also includes Singaporean bank, United Overseas Bank (UOB), – will focus on properties that have been overlooked by global real estate funds. These will include locations outside major city business districts and will have a primary focus on the eastern coast of US.
The new fund will be available to international institutional investors and pension funds. It will commence with $150m invested on behalf of the British Telecom Pension Scheme, which is managed by Hermes, as well as $25m each from UOB and Hampshire Real Estate. The fund aims to raise around $400m.
Chris Taylor, chief executive of Hermes Real Estate Investment Managers, said that the deal would blend Hampshire Real Estate’s local commercial property market expertise with the Asian distribution platform of UOB and Hermes’ risk and corporate governance expertise. Taylor, said that all parties would have a say in the investment strategy – which would be aimed initially at retail properties – instead of relying on trust in a ‘blind’ fund.
Hermes are hopeful these investments will offer the company some much needed coverage across the pond.
‘We don’t have a US exposure at present. We have learnt from the previous failings of overseas funds in allowing some control over stock selection and debt,’ said Mr Taylor.
Hampshire Real Estate, which owns equity in assets valued at $2bn, has been investing in US real estate for more than 90 years. Jon Hanson, chairman, said: ‘From our standpoint, it was important for Hampshire to find a partner that is not simply a ‘capital partner,’ but one who also understands the dynamics of real estate and shares our long-term view of real estate investment.’
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