Cordea Savills, the international property investment manager, has acquired the first two assets on behalf of its Prime London Residential Development Fund. Located adjacent to each other in Chelsea, the purchase price for the assets is in the region of £40 million (approx. €49 million). Cordea Savills partnered with a private family office co-investor and the specialist revival developer, Tenhurst, on both transactions.
The sites, a former chapel and a former college building are situated between the Kings Road and the Fulham Road. Once developed they are expected to provide c.65,000 ft² of residential space, together with landscaped grounds, secure underground parking and full services.
Cordea Savills has partnered with specialist revival developer John Hunter of Tenhurst who lists The Bromptons, Earls Terrace, Observatory Gardens, The Phillimores and Kings Chelsea amongst his impressive track record.
The Fund, which enables investors to capitalize on the shortage of both debt and equity in the development market, has a target return of 18-20% per annum over a four-year life. Cordea Savills are targeting a total equity raise of £100 million (approx. €124 million) with a final close in Q2 2013.
The shortage in the availability of bank finance following the global financial crisis has left many developers unable to secure sufficient debt and equity to commence developments. This has created an opportunity to provide financing that developers require to commence these schemes. The Fund will provide finance through discounted forward commitments, development equity funding in joint ventures with preferred development partners and the provision of mezzanine finance.
It will target opportunities in prime London locations where our research indicates maximum demand from both domestic and international buyers.
Brian D'Arcy Clark, Head of Residential Investment at Cordea Savills, commented: "Ever since the banks made it clear that they were not prepared to lend on property development, at least on workable terms, there has been a dearth of development. This has led to a shortage of newly-built units in prime London locations despite ever increasing demand. One of the major attractions of acquiring both of these buildings is that they are highly complementary. By developing them together, not only will the finished flats be significantly enhanced, but there will also be significant costs savings in the development process itself and the subsequent running costs of the buildings."
Patrick Carr, Director of Investment, commented: "Securing these high quality developments demonstrates our ability to source, structure and execute deals with high quality development and coinvestment partners. We anticipate that this will enable us to secure additional equity over the coming months, providing investors with diversification across a number of developments, developers and funding strategies."
The Fund is a sterling-denominated closed-ended English Limited Partnership with a Jersey feeder. It has a term of four years with the option to extend by a further two years, and will be able to use gearing where appropriate.
Source: Cordea Savills