London-focused fund WELPUT restructures

One of London’s largest unlisted real estate funds plans to boost investment in the wake of a restructuring, even as many property investors see outflows mount. The £1bn WELPUT fund has switched its structure from open-ended to closed-ended, which removes the possibility of redemptions and allows it to focus on growing its portfolio. The fund reportedly saw yearly redemptions hit a cap of 10% of its assets for three years in a row by the end of 2018. “The fund is now focused on a long-term plan to deliver attractive risk-adjusted returns to our investors by exploiting both the value-enhancing opportunities in the existing portfolio and investing into new assets, particularly in certain sub-markets where we see very compelling fundamentals and strong growth potential,” said Ker Gilchrist, managing director at BentallGreenOak, WELPUT’s fund manager. He added: “WELPUT is now looking for new opportunities to complement its existing assets and development projects. The fund’s overall objectives have not changed, with a focus on creating best-in-class office space for London’s diverse and dynamic occupier base to deliver attractive returns to our investors.” Investors have pulled money rapidly from open-ended funds in recent years, according to fund transaction network Calastone. In 2019, a record £2.2bn was withdrawn from open-ended property funds in the UK, equivalent to £1 for every £15 under management. This outflow saw asset manager M&G suspend trading in the shares of its £2.54bn M&G Property Portfolio fund in December. WELPUT was created in 2001 as a closed-ended fund, restructuring to an open-ended fund in 2014. After BentallGreenOak replaced Schroders as the fund manager last February, a review of the fund was launched, with the latest restructuring carried out after this. The majority of WELPUT’s 47 investors are understood to have remained in the fund, including Madison International Realty, which owned a stake of around 14% as of July 2019. WELPUT’s portfolio currently consists of nine central London properties, following the completion of the sale of Orion House just before the end of 2019 to K&K Property Holdings for £130m. This includes Warner Bros London headquarters on Theobalds Road, WC1, its recently refurbished scheme at 20 St James’s Street, SW1 (pictured below), the Farringdon Road Estate, EC1, its two near-term development sites at 105 Victoria Street, SW1, and its rejigged scheme at All Saints Street in King’s Cross, N1, (main picture), which is currently going through planning. Future purchases will likely include core assets that need a value-add strategy. Toby Phelps, managing partner at BentallGreenOak, said: “WELPUT is a core part of our European business and compliments our value-add and Core+ focused pan-European funds. “We are very grateful for the support shown by the fund’s investors for our long-term plans. It’s a compelling time to be investing in the London market and we look forward to working with the current and new investors to build on WELPUT’s legacy as a high-performing fund.” As of 30 September, WELPUT’S NAV stood at £737.9m and net initial yield was 2.9%. Its average ERV is around £70 per sq ft. The low leveraged fund agreed a £140m refinancing with Wells Fargo in June 2018, adding to its existing £235m facility with the bank. To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette