BlackRock is in talks to take over RREEF’s £400m UK Core Property Fund.
The US investment manager would merge the vehicle, which is controlled by the alternative asset management arm of Deutsche Bank, with its £2.1bn UK Property Fund, boosting its assets under management to £2.5bn.
A deal would add around £200m of retail assets, along with £100m each of office and industrial stock to BlackRock’s flagship office and retail warehouse-focused vehicle.
The RREEF fund is the poorer performing of the two, delivering a total return of -0.2% in the last quarter, 3.3% over one year and 5.9% over three years. This compares with a 0.9% quarterly return rising to 8.4% over three years from the BlackRock vehicle.
It has also been hit by redemptions and is paying out a queue of exiting shareholders as assets are sold, according to the Association of Real Estate Funds.
The open-ended fund would need to secure approval from its 90 unit holders, as of June 2011, before any deal with BlackRock could complete.
One source said that a merger with a larger fund with a strong performance record could bring higher returns to stakeholders in the RREEF vehicle, and deter them from seeking an exit.
The move by BlackRock comes after Deutsche Bank last month called off a sale of the entire RREEF business to Guggenheim Partners after failing to agree terms.
Talks with Guggenheim had been ongoing since February this year when the investment manager won an exclusive position to buy the real estate division. When talks ended, Deutsche Bank said a further update on its asset and wealth management division would be made in September.
The RREEF business was also targeted in 2008 when rival Aberdeen Asset Management attempted a hostile takeover of four funds – including the UK Core Property Fund – with assets totalling £1.4bn.
RREEF and BlackRock declined to comment.
Sofia.Furber@estatesgazette.com
