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Wellcome Trust puts up ‘very high bar’ for real estate funds

Peter Pereira-Gray reiterates his cautious approach to investing in private real estate funds, warning alignment of interest among LPs is a key concern.

The Wellcome Trust has set a “very high bar” for investing in private real estate funds amid concerns over a lack of alignment among LPs in commingled funds.

According to a report by IPE Real Estate, managing director of investments at the UK biomedical research charity Peter Pereira-Gray, said the organisation was being “more demanding and [was] less keen” to get money into the real estate market.

Pereira-Gray was speaking at a ULI European Trends conference this week when he added: “We have learned some lessons in the area of alignment of interests; one issue we have found has been funds where a small investor with a small stake has a casting vote. We will have a very high bar indeed going back in [to real estate].”

Last November, Pereira-Gray told the PERE Forum in New York that the credit crunch had brought into “high relief” the lack of alignment between LPs themselves, as all private equity real estate participants tried to deal with a lack of liquidity.

“The real issue today for the industry is whether your partner becomes a counterparty. You worry about the strength of the relationship that you once thought was very strong. We are all having to look now at our behaviour,” he said at the time.

Pereira-Gray said at the ULI conference this week that the investment division of the Wellcome Trust was looking for more than just “comfortable returns”.

“You will see people buying into real estate again at the end of the year, mainly into core assets with comfortable returns,” he said, according to the report. “We want a bit more.”

He added: “Some GPs with legacy issues will not recover as a result of so much cash going down the toilet.”