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Private equity deals in UK property drop sharply since Brexit

Private equity deals in UK property drop sharply since Brexit
August 12, 2017

NEW YORK (Reuters) - The number and value of real estate deals involving private equity funds in the United Kingdom has dropped sharply since the "Brexit" vote to leave the European Union, while transactions in the rest of Europe jumped, data released on Friday showed.

In the aftermath after last year's referendum, deal activity declined sharply due to uncertainty about how the vote would affect the UK real estate market, London-based research firm Preqin said in a statement.

Private equity deal activity has rebounded a bit since as the referendum's effects have become clearer, although they still present concerns for investors, the firm said in its Real Estate Spotlight report.

"The UK's plans to exit the EU have the potential to create disruption to investment activity in real estate both in the UK and elsewhere in Europe," Preqin said.

The amount of capital raised for UK-focused private equity real estate funds in the first half of 2017 fell to $2.9 billion from $3.4 billion raised in the previous six months and $3.7 billion a year earlier.

Fundraising for the rest of Europe was higher at $17.6 billion raised in the first six months of this year, $9.9 billion in the second half of 2016 and $11.7 billion a year earlier.

Deal flow in the UK rose to 201 completed transactions from 186 in the second half of 2016 but was down from 315 a year earlier.

The aggregate value of completed private equity deals in real estate rose to $17.5 billion from $10.4 billion in the previous six months, Preqin said. The year-earlier figure was higher at about $18 billion.

In the rest of Europe, the total value of private equity deals more than doubled to $40.6 billion in the first six months of this year from $18.8 billion from the latter half of 2016.

The UK is central to the European private real estate industry. In the 10 years ended July 2017, UK-based fund managers have raised $108 billion, compared with $102 billion in the rest of Europe, Preqin said.

Until final details of how the UK leaves the EU emerge, dealmaking will remain uncertain and high on a list of investor concerns, the firm said.