Key Takeaways
- • Investec is opening its UK real estate equity strategy, REALIS, to external investors for the first time, targeting wealth managers, family offices and advisors, according to WealthBriefing.
- • REALIS typically invests £5 million to £20 million of equity per transaction, below the £30 million-plus cheque sizes increasingly targeted by larger private equity real estate managers.
- • Third-party minimum investment is typically £1 million per transaction, with a target net return of around 15 per cent-plus over a two-to-four-year period and loan-to-value capped at 65 per cent.
- • REALIS has closed 10 deals with combined gross development value above £300 million and aims to invest around £250 million of underlying property value per year.
- • Investec and the REALIS management team co-invest in every transaction, and around half of current REALIS clients are international investors seeking UK exposure.
Summary
Investec is opening its real estate equity strategy, REALIS, to outside investors for the first time, targeting wealth managers, family offices and advisors seeking exposure to UK real estate, according to WealthBriefing. The strategy, launched more than two years ago, has previously been backed only by clients across Investec's private banking and wealth management businesses. Yon Papageorgiou, head of real estate equity investments at Investec, told WealthBriefing that working with third-party clients was always part of the original REALIS plan.
REALIS typically invests £5 million ($6.6 million) to £20 million of equity per transaction, with the underlying asset value higher once leverage is considered. That ticket size sits below the £30 million-plus equity cheques increasingly targeted by larger private equity real estate managers. The strategy closed its 10th deal last week, taking combined gross development value of completed transactions to more than £300 million. Minimum investment for third-party investors is typically £1 million per transaction. The strategy targets net returns of around 15 per cent-plus over a typical two-to-four-year investment period, with loan-to-value capped at 65 per cent. Investec and the REALIS management team co-invest in every transaction, and Papageorgiou said Investec clients will continue to contribute capital alongside external investors.
Papageorgiou said the lower mid-market has become increasingly underserved as regulation and the fixed costs of managing institutional capital have encouraged many private equity managers to move up to larger transactions or exit the segment. He said REALIS can leverage Investec's existing infrastructure and network of more than 150 operating partners, keeping the incremental cost of smaller transactions relatively low. The firm is looking to invest around £250 million of underlying property value each year in a UK market where roughly £50 billion of property transacts annually, and he cited significant repricing as creating a buying opportunity for well-capitalised investors.
Prime regional offices are a sector where REALIS has been particularly active. Prime rents across the Big Six regional cities have risen 6 per cent and 7 per cent over the past two years respectively, the strongest back-to-back growth on record, as occupiers favour high-quality space while new supply remains constrained. Papageorgiou said around half of REALIS clients are international investors seeking UK exposure.
REALIS typically invests £5 million ($6.6 million) to £20 million of equity per transaction, with the underlying asset value higher once leverage is considered. That ticket size sits below the £30 million-plus equity cheques increasingly targeted by larger private equity real estate managers. The strategy closed its 10th deal last week, taking combined gross development value of completed transactions to more than £300 million. Minimum investment for third-party investors is typically £1 million per transaction. The strategy targets net returns of around 15 per cent-plus over a typical two-to-four-year investment period, with loan-to-value capped at 65 per cent. Investec and the REALIS management team co-invest in every transaction, and Papageorgiou said Investec clients will continue to contribute capital alongside external investors.
Papageorgiou said the lower mid-market has become increasingly underserved as regulation and the fixed costs of managing institutional capital have encouraged many private equity managers to move up to larger transactions or exit the segment. He said REALIS can leverage Investec's existing infrastructure and network of more than 150 operating partners, keeping the incremental cost of smaller transactions relatively low. The firm is looking to invest around £250 million of underlying property value each year in a UK market where roughly £50 billion of property transacts annually, and he cited significant repricing as creating a buying opportunity for well-capitalised investors.
Prime regional offices are a sector where REALIS has been particularly active. Prime rents across the Big Six regional cities have risen 6 per cent and 7 per cent over the past two years respectively, the strongest back-to-back growth on record, as occupiers favour high-quality space while new supply remains constrained. Papageorgiou said around half of REALIS clients are international investors seeking UK exposure.
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