Cordea Savills, the international property investment manager, has had a first close of its Prime London Residential Development Fund following a major global private bank providing £25 million (approx. 31 million) of initial equity. There will be further closings of the Fund over the next 12 months, with a second close planned for August with an Asian private bank.
The Fund will target an internal rate of return of 18-20% per annum by providing finance to a number of prime London residential developments.
The investment rationale for the Fund is based on the shortage of financing available to developers, together with the significant demand for prime London residential property. The Fund will capitalize on opportunities created by the 'funding gap' that has arisen due to reduced bank lending by providing the equity or debt for the development of schemes with existing planning consents.
Patrick Carr, Director of Investment, commented: "The next 18 months are going to be an extremely interesting time to be an investor in this market, whether that means providing debt, equity financing, or buying completed developments for their further growth potential. This proposition is one of the most compelling in the property sector at the present time.
"The fact that the Fund has received strong international demand demonstrates that the investment case for prime London property is well understood by investors globally."
Prime London residential property has outperformed other UK property sectors over the past 20 years in terms of capital growth and is forecast to deliver an average total return of ca. 9% per annum over 2012-2016.
Growing global demand, supply constraints and favorable economic and demographic indicators have supported prime London residential property's 'safe haven' status for both domestic and international investors.
The Fund is a sterling-denominated closed-ended English Limited Partnership with a Jersey feeder. It will have 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: Citigate Dewe Rogerson