Barwood Capital, the Northampton-based real estate investment business, has signed an agreement with Caisson Investment Management (“Caisson”) to acquire and asset manage a multi-let industrial (MLI) estate portfolio for Barwood Capital’s 2017 Property Fund.
The 2017 Property Fund closed in March 2018 with the ability to invest up to £150 million in UK regional property. Barwood Capital has committed up to £15.0 million of equity for Caisson to target MLI estates across the UK, with an estate size of between 10,000 sq ft to 50,000 sq ft, up to 50 units, and a target lot size of between £2–£6.0 million. Caisson has already identified a pipeline of opportunities, with offers having gone out.
Estates will be targeted for their asset management potential with vacancy levels of no less than 5.0% and up to a maximum of 50% in quality urban or edge-of-urban locations, including those older estates with the potential for regeneration and refurbishment. Caisson and Barwood Capital will look to substantially increase the rental income and capital values through active asset management, including capital expenditure, tenant retention, development where possible, and reducing vacancy levels.
Barwood Capital sees the UK MLI sector as an attractive sub-segment of the wider and popular industrial market, with increasing demand from a well-diversified tenant base fueled by fast-growing changes, including retail, last-mile logistics, and technology. Supply remains constrained due to the dual effect of limited new development and loss of space to higher land value uses, such as residential. In the last five years, rents in MLI estates have risen by almost a third, and Caisson is forecasting further rental growth of 3-5.0% per annum during the next five years.
Danielle Sheppard, investment director, of Barwood Capital, commented: “The opportunity is for us to aggregate a portfolio of up to £40.0m of UK multi-let industrial estates to gain specific exposure to this sector, improve these estates for the benefit of the occupiers, and for our investors to benefit from secure income and capital growth.”
Hugh Elrington, director of Barwood Capital, added “Caisson is an established specialist industrial asset manager, whom I have known and worked with previously on similar projects. Together we see the continued opportunity to add a high stable income return to the investment profile of the 2017 Property Fund.”
Philip Stott, investment partner, Caisson Investment Management, added: “The MLI sector is looking undervalued in comparison with other sectors. We strongly believe in the ability to commit this equity to the right estates and achieve the targeted returns through our in-depth market knowledge and proactive approach.”
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David Carter, managing partner, Caisson Investment Management, said: “This is an exciting mandate for Caisson. Barwood Capital is an experienced investor which has rapidly grasped the potential opportunity, and we look forward to working with them. The MLI sector continues to be fragmented enough to deliver significant upside returns within a sector that is experiencing long-term rental growth due to basic supply demand imbalances.”