UK-focused manager Moorfield Group has held a final close for the fifth vehicle in its flagship diversified value-add fund series, Moorfield Real Estate Fund V, PERE can reveal.
The firm has raised £330 million ($426 million; €392 million) across MREFV, co-investment initiatives and Moorfield Real Estate Investment Trust, a private non-traded REIT launched by the firm in October last year and investing in residential-for-rent sectors.
Moorfield declined to disclose the share of capital raised for MREFV specifically. The firm held a first close for MREFV in February 2022 on £270 million.
Following the closure of MREFV, the firm is looking to raise an additional £250 million across a number of sector-specific side vehicles. These include a self-storage fund for which the firm is expecting to raise between £50 million and £100 million, and a multifamily build-to-rent fund with a target of £50 million to £100 million. The firm sees potential to raise other sidecars targeting purpose-built student accommodation, co-living, logistics or industrial outdoor storage in the future.
Moorfield has termed the fundraise for MREFV and its side vehicles as a ‘hub and spoke’ model, whereby MREFV is the ‘hub’ that will seed assets for the various ‘spokes,’ of which MREIT was the first to launch. It is understood a portion of the £100 million raised for MREIT upon its launch was allocated from MREFV. MREIT has a target to reach £500 million in value.
Together with leverage, Moorfield is looking to deploy a total of £1 billion in the UK through MREFV and its seeded side vehicles. The target return will vary for each of the sidecars, but will be roughly consistent with the 15 percent net IRR target for MREFV.
Moorfield has so far deployed more than half of MREFV’s capital, most recently investing around £150 million to forward-fund a 440-home multifamily development in Trafford, Manchester in January.
Appetite ‘waxes and wanes’
Charles Ferguson Davie, Moorfield’s co-CEO and chief investment officer, says the rationale behind the hub and spoke model was primarily to satisfy demand for more sector-specific strategies by offering fund investors the opportunity to double down in a particular area, and providing non-fund investors the option of specific sector exposure via a “joint venture-type format.” Moorfield will have discretion over some of the side vehicles, but there will be scope for investors to have some discretion in other cases.
The ability to grow the firm’s platforms in each of its target sectors was another draw. “We weren’t creating a co-investment sidecar that would invest in everything we do but with better terms. It was always going to be co-investment for a specific sector or a specific deal,” he explains, adding that scale in some of Moorfield’s target sectors will drive “better results,” particularly in single-family rental housing, where institutional investment is still relatively nascent.
Offering flexibility via a multifaceted product offering was also important, says Ferguson Davie, who notes that investor appetite for different types of real estate product – for example sector-specific vs diversified funds, country-specific vs regional or global funds, or commingled funds vs JVs – “waxes and wanes” over time. “There’s always going to be investors that want the diversified approach and others that want the sector-specific approach.”
Investors in the main fund were mostly re-ups and are located across Europe, North America and Japan. They also include Moorfield’s first UK-domiciled investors, which are university college endowments. The London-based manager was established in 1996 as the first UK specialist JV partner for US private equity real estate groups, and began raising its own discretionary vehicles in 2005.
“We didn’t necessarily set out to attract UK investors, but we have gained some. I think we’d like to have more UK investors going forward,” says Ferguson Davie, adding that the trend for pooling assets among local government pension schemes and the growth of defined contribution pension schemes may lead to increased appetite for value-add real estate investing among UK institutions in future.
According to PERE data, the firm had set a target of £350 million for MREFV. The prior fund in the series, Moorfield Real Estate Fund IV, closed on £220 million in October 2017, PERE data shows. The largest fund in the series so far was MREFII, which was closed with £389 million in 2007.
Ferguson Davie says the fundraising market has been “tough” for most people over the past 18 months. “It’s hard to fundraise, whoever you are, whether you’re a UK specialist, pan-European or global, or whether you’re sector specific or diversified. There is a just a general reduction in the level of investor appetite.”
He adds that this may be about to change, however: “There’s an expectation that as rates come down the market will improve and we’ll start to see some value stabilization, or maybe even improvement, and that will give some the confidence to invest.
“I suspect the mood will shift at some point from one of fear to greed and not wanting to miss out. It’s hard to tell exactly when that will happen.”
