Middle East investors eye prime London housing

LONDON (Reuters) - Coba Asset Management, which manages property funds for UK family offices and wealthy individuals, is raising 250 million pounds from Middle East investors to target prime London housing, it said on Wednesday.

"There are a few big development sites where we believe the current owners can't develop it because they haven't got any money, so there are opportunities for distressed sales," Coba's Managing Director, Graham Gould, told Reuters in an interview.

The Peregrine Fund, which is raising money from wealthy Middle Eastern families as well as sovereign wealth funds, will invest in the British capital's prestigious neighbourhoods, such as Mayfair and Knightsbridge, he said.

"If you look at who the lenders were in that market, it was the Icelandic banks, the Irish banks, and HBOS, all the banks that are most in trouble now," Gould said, adding the fund could also buy over the loans of indebted developers.

Europe has largely escaped the wave of foreclosures that has dogged the United States, but experts expect more repossessions in 2010 if lenders called time on their most troubled mortgages to free up funds for stronger borrowers.

Coba, which currently has 200 million pounds in assets under management, will be investing for Middle East investors for the first time, and is promising annual returns of 15 to 20 percent for its newest fund, Gould said.

He expects the first deal with a London developer to close by the start of 2010, but declined to name the party.

"It's the easiest idea to sell ... a lot of wealthy Middle East investors already have properties in London so they understand the market and know prices have come off a little bit, so they see the opportunity," he said.

British house prices rose for a fifth month running in September to leave them flat year-on-year, the Nationwide Building Society said earlier this month, in a further sign that the UK housing market is stabilising.

Coba is also in the process of raising another up to 125 million pounds for its new UK Strategic Income Property, to pick up bargain commercial real estate after values in the UK plunged 44 percent from their peak in mid-2007.

The seven-year fund is eyeing a diverse portfolio of low-risk assets, and will target to return 10 percent and annual distribution of 5 to 6 percent when fully invested, Gould said.

(Reporting by Daryl Loo; Editing by Andrew Macdonald)

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