Aviva closes real estate recovery fund

Aviva Investors has announced a third and final close for its UK Real Estate Recovery II Fund at £140 million, below its original target of £350 million.

Aviva said the earlier than planned close to the fund was due to the speed of developments in the property market. It said a delayed close would not be in the interests of existing investors. The fund, launched in September 2013, is ungeared and focuses on secondary assets in UK commercial property. It has a target return of 8-10% a year after fees and a distribution yield of 6-6.5%. The fund’s manager, Anna Rule, said: “Within the fund, we have aimed to take advantage of the short-term opportunity in the pricing gap between secondary and prime real estate. Since launch, investment activity has already seen the purchase of 13 assets with a collective value of c.£75 million. The fund has therefore deployed a significant amount at an early stage of the current cyclical upturn, thus benefiting from attractive market pricing.”

Aviva said that it believes that the outlook for UK property is positive, with strong investor demand and further yield compression likely.