Moorfield’s investment strategy is to maximise returns on equity invested through the acquisition, active management and disposition of real estate and real estate related opportunities. The required proficiency to pursue this goal arises from Moorfield’s diversity of knowledge and abilities, thereby allowing the recognition and subsequent capitalisation of all the factors driving the sector, its sub-sectors and its buyers and sellers.

Moorfield believes that the UK real estate market is an appealing platform for investment. The relative size, liquidity, transparency and legal framework, together with the expertise and maturity of its professional governing bodies and advisors are all additional and important features of the attractions of this UK market. Real estate investment opportunities continually arise throughout the UK, from Central London through the regional markets, allowing for diversity in location and type, enabling Moorfield to adjust its target market to capitalise on favourable market conditions.

Over the last 30 years, the real estate cycle has unarguably been volatile. However, Moorfield believes that there is invariably the opportunity to make successful real estate investments, as long as the investor is sufficiently experienced and broad thinking to change focus and be prepared to diversify, whilst retaining flexible financing structures. Sub-sector specialisation alone has been, and still is, a luxury afforded to those that can (or should) remain substantially under-invested for long periods until their ‘cyclical turn’ comes around.

Participants in the UK real estate investment market ‘trade’ their assets with varying degrees of regularity and extent. They buy and sell assets for reasons that are related to economic, political, financial, corporate or personal reasons, as well as those directly related to the asset(s) themselves. Moorfield believes that excellent investment opportunities can come from dealing with these market participants, when the reasons for the trade are, using all reasonable endeavours, fully understood.

Main opportunities for Moorfield Real Estate Fund II

The different needs of the many real estate investors produces numerous opportunities for Moorfield on behalf of MREF II. Moorfield believes there are five primary areas where it will find these opportunities.

Assets needing active asset management
Investment opportunities differ in their appeal to investors dependent upon the rationale for investment. Some investors are very risk averse whilst other will determine the degree of risk they are prepared to take, often according to the overall investment returns they are seeking to achieve. Many investors, such as institutions, will sell an asset as it becomes higher risk and/ or more dependent on active asset management to maintain or enhance value. Some investors will be selling their asset as a result of an immediate or imminent difficulty they feel unable to resolve, or perhaps do not have the time to tackle, or there may be the need for capital expenditure of a quantum that they do not possess. There can, of course, be many issues that relate directly to the asset and the profile of the asset owner that results in a disposal. The asset or opportunity in need of active asset management is one of the types of opportunity that is being sought by Moorfield. After a period of intense asset management and measured capital expenditure, the improved investment can be re-offered to the more passive and risk averse investor market at a premium to the acquisition (plus expenditure) price.

Assets sold as part of a corporate disposal programme
In the last 10 years, many organisations have come under considerable pressure to enhance shareholder value through corporate restructuring and by returning the business focus to stated core activities. Speed to market and the flexibility to change to suit market circumstance is a premium rated ability. One of the fall-outs of this activity has been the disposal of real estate held as fixed assets on the balance sheet. The capital released from asset sales can be re-invested in the core activities and directed toward improving business proactive and financial returns. These assets can offer significant investment appeal to Moorfield on behalf of MREF II from a number of perspectives, ranging from lease-backs to refurbishment/ redevelopment.

A second fall out from changing business practice and corporate reorganisation has been the shorter more flexible leases demanded by the occupier. The opportunity is to embrace this change where necessary and not fight against it. As long as space vacancy (hence income loss) can be kept to a minimum, income levels can be greatly increased through an actively managed flexible lease programme. Higher rents are paid by the tenant for this freedom. A focused leasing team with an active tenant relationship will start the process of looking at the investment as a business needing active management.

Assets resulting from reorganisation and consolidation of businesses and funds
Company take-overs, privatisations, insolvencies and refinancings can result in opportunities arising, particularly if it is the real estate sector or involves asset rich businesses. In addition, substantial portfolio acquisitions and leveraged real estate funds reaching maturity are also a source of interesting potential. Furthermore, given the shorter debt maturities of many debt-driven investors, the need for refinancing may result in significant acquisition opportunities. This is an ideal area for Moorfield as many of these portfolios invariably require large amounts of capital and involve complex tax structuring and corporate finance knowledge.

Assets in emerging real estate markets
Emerging real estate markets can also offer opportunities for MREF II. A great deal of research and caution is required prior to making an investment, with the intent of not being ‘first to market’ but instead being ‘early to market’. First to market will test demand and normally highlight errors that can be seen and later avoided. Recent examples of this activity where Moorfield has strategically and actively participated are; student and key-worker accommodation (Domain), and limited service hotels (Kew Green Hotels).

Asset exposure through corporate or debt investment
Investing in a business through financial, strategic and corporate support, thereby enabling it to grow, is an area that is of considerable interest to Moorfield. Experienced management teams with successful track records are encouraged to develop their strategic business plan with Moorfield and then create or grow a dynamic business with critical mass.

Acquisition of corporate asset debt enables Moorfield to give MREF II direct or indirect exposure to companies and/or assets through means other than equity investment.

Moorfield Real Estate Funds target areas
Moorfield believes that real estate investing must be considered on an opportunity by opportunity basis, as a result, it is necessarily interested in a wide range of assets. The Fund is likely to make investments in at least some of the following areas:

• Single asset, multiple asset or corporate acquisitions
• Central London: office/retail/mixed use office and retail
• Focus on major cities and towns such as Edinburgh, Glasgow, Newcastle, Manchester, Leeds, Liverpool, Birmingham, York, Bristol, Reading, Guilford, Kingston, Brighton, Southampton etc.
• Industrial: located on major routes and interchanges throughout the UK
• Retail warehousing
• Leisure: A3, hotels, factory outlets, sports/health clubs, pubs
• Healthcare
• Student and key-worker accommodation
• Private residential