BP ropes in Cube Real Estate for £100m recovery fund

The property arm of the bp Pension Fund has formed a £100m UK investment fund to take advantage of depressed prices.

BP’s Ropemaker Properties has teamed up with London-based property company Cube Real Estate to create the Cubemaker Partnership.

Cube will choose the investments and provide asset management for the properties bought by the fund to try to increase their value.

Funds created to snap up assets whose value had fallen were very much in vogue earlier this year, and billions of pounds of equity were raised by companies such as Moorfield, Threadneedle, London & Stamford and Carlyle. Many indicated that they expected to be able to start buying at the end of this year or beginning of next year at the latest.

However, as the global financial crisis has deepened, the launch of funds looking to buy cheap property has slowed, while investors remain unsure how long the downturn will last and how far values will fall.

The fund will have an initial £50m of equity, 80% of which will be provided by BP and the remainder by third-party investors, including Cube Real Estate. It will make initial investments using this equity, and have the potential to add gearing of up to 50% at a later date.

It will look to invest in property where there is asset management potential or where values have fallen significantly.

‘Market conditions bear resemblance to the pre-recovery cycles of 1992 and the immediate post-millennium years, although the debt market is as poor as we can remember,’ said Stuart Loggie, director at Cube Real Estate.

‘Cubemaker represents a flexible platform for us to participate in the next property cycle, as we are able to respond quickly to market changes and particular opportunities. We anticipate the market uncertainty will offer interesting projects, which our equity-rich fund can take advantage of in the near term, while Cube will work thereafter to add value over the life of the fund.’

The fund will target smaller properties in all asset classes.

‘Cubemaker will focus on acquiring sub-£10m assets where Cube Real Estate has an excellent history of adding value,’ said Tim Haynes, head of property at BP.

The BP Pension Fund has more than £14bn of assets under management.

Cube was set up in 2002 by Loggie founder of investment agency Morgan Loggie, and Chris Oliver, founder of Salmon Developments.

King Sturge Financial Services advised Cube Real Estate on the establishment of the fund and is the UK regulated operator of the fund.

Property Week, 03/10/2008.