Final close of new Property Fund with £212m equity commitments
- Property Alternatives Fund III closed ahead of target thanks to strong demand from U.S. and European investors
- Highlights the growing interest in sustainable and impact-driven property investment
- Bridges’ third property fund, and the largest vehicle the firm has raised for any strategy to date
Bridges Ventures (‘Bridges’), the specialist sustainable and impact investor, today announces the final close of Bridges Property Alternatives Fund III (‘the Fund’) with equity commitments of £212m. The Fund will apply gearing at a project level to provide it with potential firepower in excess of £500m.
The Fund was able to close ahead of its original £200m target thanks to strong interest from European and U.S. institutions in the rapidly-growing area of sustainable and impact-driven property investment. It attracted support from leading institutional investors on both sides of the Atlantic: around 80% of the capital came from UK and US pension funds (including local authority pension funds in Greater Manchester, Merseyside, and South Yorkshire), with the balance from family offices, foundations and insurers (including US-based Prudential Financial, Inc. [PFI]1).
Bridges specialises in using sustainability and social impact as a way to identify investments with the potential to drive financial value along with social and environmental improvements. This is the largest fund the firm has raised for any investment strategy to date.
The Fund invests in direct property and property-backed businesses, focusing on regeneration areas, buildings showing environmental leadership, and niche sectors being affected by changing demographics and consumer needs – including healthcare, education, SME business space and affordable residential accommodation.
Since its first close on more than £120m of equity commitments in April 2014, the Fund has successfully completed six deals in less than a year – illustrating the current level of opportunity in the market. These deals include:
- The £85m acquisition from Regus of the Evans Easyspace portfolio, with assets diversified across 50 locations providing serviced offices and industrial space, in line with Bridges’ belief that SMEs play a vital role in job creation and regeneration in underserved areas;
- The building of 240 attractive residential apartments as part of the regeneration of the Old Vinyl Factory in Hayes – a site that was once home to EMI Music but has now been derelict for over 30 years. The development (which will include green spaces throughout) is just two minutes from Hayes and Harlington station, the first stop on the forthcoming Crossrail line from Heathrow Airport to Central London;
- Barclays House, an environmentally-led refurbishment of a part-vacant office building in Leeds;
- Prime 10, a derelict site in Wolverhampton that is being redeveloped to create a high-spec warehouse and logistics scheme comprising 400,000 sq. ft.
Following these transactions, about 40% of the Fund’s capital has already been invested and committed. The Bridges team continues to see a strong pipeline of opportunities.
Simon Ringer, Partner and Head of Property Funds at Bridges Ventures, said:
“We are hugely grateful for the support we have had from both new and repeat investors for this fund. We believe this a strong endorsement of our impact-led strategy, which we have shown can deliver compelling investment returns alongside positive and lasting societal impact.
“The Fund’s deals to date – many of which have been originated off-market, brought to us by our strong network of development partners and entrepreneurs – demonstrate our broad range of property investment and management skills, from leasing strategies to full scale redevelopment.
“The Fund has already made an extremely strong start, and we remain very excited by the opportunities in our pipeline. We look forward to rewarding our investors’ support by delivering strong financial returns as well as demonstrable social and environmental impact in the coming years.”
The closing of the Fund follows a strong year for Bridges’ previous property funds, the Sustainable Property Fund and the CarePlaces Fund. Across these two funds, Bridges has successfully exited eight assets in the last 12 months, with IRRs ranging from 20% to 60%. Exits have included:
- 158/170 Edmund Street, Birmingham: This vacant office building in Birmingham’s business district was extensively refurbished, incorporating a number of environmental features such as photovoltaic (PV) panels and smart lighting. Following strong demand from tenants, the building was sold to F&C UK Property Fund for £11.5m in December 2014, representing an IRR of 35% for Bridges Sustainable Property Fund
- Elmbridge Court, Gloucs: Bridges bought this 44,000 sq. ft. business park, which comprises 25 office buildings, in 2011 in an off-market transaction. It then invested in installing PV panels across the site, ultimately reducing carbon emissions by 60% and reducing tenant costs by a half. The site was sold to Archimedes, a fund managed by M7 Real Estate, generating an IRR of 23%
- Care homes, Bucks/ Norfolk: In March, Bridges’ CarePlaces Fund sold two care homes in Stoke Mandeville and Diss to Octopus Healthcare for a combined £20.5m, reflecting a net initial yield of 5.4%. Bridges and JV partner Castleoak built both homes, in response to the growing demand for high-quality private care homes for the elderly (especially those suffering from dementia). Both were already pre-let to highly-regarded charitable operators
1. Prudential Financial, Inc. of the United States is not affiliated in any manner with Prudential plc, which is headquartered in the United Kingdom.
Notes to editors:
About Bridges Ventures
Bridges Ventures is a specialist fund manager focused exclusively on sustainable and impact investing: using commercial investment strategies to generate attractive financial returns alongside positive social and environmental impact. It manages nearly £600m across its Sustainable Growth, Property and Social Sector funds.
The Bridges Property Alternatives Fund III – which held a first close in April 2014 with over £120m of equity commitments – invests either directly or via joint ventures in property and property-backed operating businesses. It targets niche real estate opportunities driven by demographic shifts and changing consumer needs in areas like healthcare, education, SME business space and affordable residential accommodation.
Investors in the Fund include Bellona Holdings, Ceniarth, Clwyd Pension Fund, Great Manchester Pension Fund, The Green Room Charitable Trust, Merseyside Pension Fund, South Yorkshire Pensions Authority, the East Riding Pension Fund and Prudential Financial, Inc. [PFI].
Property Alternatives Fund III is Bridges’ third property fund. It has previously raised Sustainable Property Fund, which launched in 2009 and is now fully invested, and CarePlaces, a specialist vehicle raised in partnership with developer Castleoak to create high-quality environmentally friendly care homes, which closed in 2012.
Bridges has previously made a number of successful investments in property-backed operating businesses through its Sustainable Growth funds. These include The Hoxton Hotel and The Office Group.
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