Kames UK Active Value Property Fund exceeds fundraising target and closes to new commitments at £275m

Kames Capital has closed the Kames UK Active Value Property Fund after exceeding its fundraising target.
 
The closed-ended fund which was launched in October 2013 has now raised £275 million from institutional investors and has closed to new commitments. It was initially launched with a target of £250 million.
 
Managed by Philip Bach, the Kames UK Active Value Property Fund targets good quality secondary properties, particularly those in the sub £15 million bracket. These provide access to good quality assets offering attractive income returns, together with asset management opportunities, such as through extending leases, letting vacant space and refurbishments. This part of the market is often overlooked by large property funds and – with bank lending becoming more scarce and expensive – can also be difficult for smaller commercial property investors to access.
 
The fund is structured as a Jersey Property Unit Trust and has a seven-year life, with the opportunity to extend for a further two years. The fund has a target IRR of 10%.
 
Two of the fund’s recent purchases include a retail building occupying a prominent position in the heart of Sheffield, which the fund purchased for £5.75m at a net initial yield of 7.5%. It is let to Sports Direct, Poundland and the British Heart Foundation, three retailers each with strong covenants. The property offers the potential for improving rental level off a historically low base and the active management potential to convert the upper floors for an alternative use.
 
The other property in Town Square in Basildon, Essex, comprises a four storey building with retail premises on the ground floor and purpose-built offices on the upper floors. It was purchased for £9.83m at a net initial yield of 9.0%. It is let to 11 tenants with strong retail covenants and offers the active management potential to re-gear leases, while the long-term town plan for Basildon will greatly improve the town centre.
 
Shaun McWilliam, Kames Capital’s head of institutional sales for property, says: “We are delighted to have exceeded our initial fundraising target. The fund has proven popular with institutional investors who recognise the opportunity in secondary property and are attracted to our proven active value approach. The fund has already completed or exchanged on properties worth £210 million at a blended net initial yield of 8.6%.Our focus now is on investing the remainder of the committed funds and we are continuing to source high-quality secondary stock on attractive yields with good asset management opportunities.”