Alternative debt provider Man Global Private Markets is working on plans to enter the UK residential market.
The global private markets business of Man Group, which launched last year after the acquisition of property investment manager Aalto Invest, has so far financed residential assets in the US market and in Ireland and is now considering opportunities in the UK.
Speaking to Real Estate Capital, Mikko Syrjanen co-head of real assets at the firm, explained that the move “makes sense”, given the property manager’s track record investing in residential markets.
“We are looking outside the super-prime areas in central London and focusing on southern England to source opportunities for attractive risk-adjusted returns,” Syrjanen said.
Meanwhile, Man GPM is investing in the London office market with a “very conservative” approach as it considers the segment to be near the top of the market. “In London, we are quite late in the cycle. Real estate yields for office buildings are at all-time lows, and, at the same time, you have high rents. West End rents are 70 percent higher than they used to be in 2007,” Syrjanen said.
He added: “On the other hand, there is a lot of new office construction happening in London. If Brexit happens, banks and other firms may have to move people out of London and the question is, who is going to occupy the new buildings? This makes us somewhat cautious about the next three or five years.”
Through its Aalto Global Real Estate Debt fund, holding $1.3 billion of assets under management as at 30 September 2017, Man GPM is understood to have deployed about $900 million in residential debt.
The fund has actively invested in the US residential market for the past two years, particularly in the single-family housing sector. “We like this area as we believe debt margins are attractive given the risk,” Syrjanen noted.
Only 34 percent of single-family properties across the US have recovered to pre-peak prices, he explained, adding that reasonable valuations combined with lower levels of US household indebtedness, supports a constructive outlook for US residential real estate.