INTERVIEW: FORE Partnership Looks Outside London To Find Property Gems

Tom Burroughes

30 October 2014

FORE Partnership is a co-investing property platform that caters to family offices and private investors. Launched in April 2012 and based in London, the firm this week announced a major property acquisition in Leeds, in northern England, adding to a run of moves since it was set up. This publication asked FORE Partnership managing partner Basil Demeroutis, about its business, strategy and outlook.

How many specific investments has FORE made since it was founded?
Yorkshire House is FORE’s fifth property - €150 million invested in 24 months. The investment portfolio now consists of an office building in central Aberdeen, two high street retail units inside the M25, Yorkshire House, a London office building and a multi family residential property in Berlin. Our central London office asset, 58 Victoria Embankment, is noteworthy as we are about to announce that work has started to create a highly sustainable, top quality office building on the Thames.

What sort of investment returns/gains are you making? Are you doing better than expected?
We don't talk about specific returns, but our investment strategy is to seek out "deep value" and to bring a value investor mindset to property, something that we see as typically absent from property investing. We are doing this via a combination of finding "mis-priced" income with upside from active asset management like refurbishment or repositioning. We think well-located assets with irrationally high cash flow will perform well in a wide range of macro scenarios and are where the best risk adjusted returns sit today.

The portfolio is quite young but it is performing ahead of plan - last year it was up well in excess of 20 per cent. From the income producing investment properties, we are distributing high single digit cash flow to our investors quarterly, which has been well received.

How would you describe the state of the real estate market in which you operate at the moment in terms of the opportunities to find value, some of the risks, etc?
It's a treacherous market in our view. Valuations are being driven more by capital flows than fundamentals, making it a highly competitive environment in which to be making sound real investments.

Last year we looked at 1,100 deals to do three. This year will be more. As value investors, we have moved away from the prohibitive pricing in London save for some truly off-market situations. Our main focus in the UK is regional. We believe in the macro trend metropolitanisation - the growing influence of major cities and super regional centres. We are already seeing that filter through to rents in these markets and there is a strong case for this to continue. There is a sustained weight of capital with its sights set on the UK and so now more than ever we see that buyer credibility wins in the competitive bidding environment. We were not the highest offer on Yorkshire House, for example, but the vendor knew we would deliver.

We are spending a lot of time in Europe. Germany has been a key target of ours over the past 24 months and continues to be so. We currently are acquiring a German shopping centre, which will close before the end of the year, and we look at a lot of retail over there. Good value offices are harder to come by but we see pipeline in the second and third tier cities in good locations.

Have you added to your investment teams lately and if so, who in particular is worth mentioning?
In terms of our staff, no, the team is set. We are looking to recruit in the New Year. In terms of investors, we have added a number of new families to the platform this year. We now represent major families from the UK, Germany, US, Asia and Latin America.