The firm said it was always planning to enable third-party investors, such as wealth managers, to get into its real estate equity offering.

Investec is opening its real estate equity strategy, REALIS, to outside investors for the first time, targeting wealth managers, family offices and advisors seeking exposure to UK real estate, this publication can exclusively report today.

The strategy, launched more than two years ago, and which to date has been backed by clients across Investec’s private banking and wealth management businesses, typically invests £5 million ($6.6 million) to £20 million of equity per transaction, with the underlying asset value higher once leverage is considered. This is below the £30 million-plus equity cheque size increasingly targeted by larger private equity real estate managers. REALIS closed its 10th deal last week, taking the combined gross development value of transactions completed to more than £300 million.

Minimum investment for third-party investors is typically £1 million per transaction. The strategy targets net returns of around 15 per cent-plus over a typical two-to-four-year investment period, with loan-to-value capped at 65 per cent.

Working with third-party clients was always part of the original REALIS plan, Yon Papageorgiou (pictured below), head of real estate equity investments at Investec, told WealthBriefing in a call.

Yon Papageorgiou

“Investec clients will continue to contribute capital, complemented by external investors,” he said. Investec and the REALIS management team also co-invest in every transaction.

Papageorgiou said the lower mid-market has become increasingly underserved as regulation and the fixed costs of managing institutional capital have encouraged many private equity managers to target larger transactions or leave the segment. REALIS can leverage Investec’s existing infrastructure and network of more than 150 operating partners, keeping the incremental cost of investing in smaller transactions relatively low, he said. 

“We are looking to invest around £250 million of underlying property value each year into a market where roughly £50 billion of property transacts annually, so there is plenty to go around. We’ve also had significant repricing, creating a compelling buying opportunity for well-capitalised investors without legacy challenges,” Papageorgiou said.

One sector where REALIS has been particularly active is prime regional offices. Prime rents across the Big Six regional cities have risen by 6 per cent and 7 per cent over the past two years respectively. This is the strongest back-to-back growth on record as occupiers increasingly favour high-quality space while new supply remains constrained. 

Papageorgiou said around half of REALIS clients are international investors seeking UK exposure.

(Main photo shows 2 College Square in Bristol, one of the strategy's office acquisitions.)