Cordea Savills, the international property fund manager, is launching the Prime London Residential Development Fund.
The Fund will capitalize on opportunities created by the development 'funding gap' which has arisen due to reduced bank lending and the strength of the investment characteristics of the sector. The Fund is targeting an IRR of 18-20% per annum which will be achieved by investing in a number of prime London residential developments.
The shortage in the availability of bank finance following the global financial crisis has left many developers unable to secure sufficient debt to commence developments. This has created an opportunity to provide the additional finance 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 potential for capital growth during the development period.
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.
Prime London locations targeted by the Fund include Mayfair, Kensington, Chelsea, Fulham, Knightsbridge, Belgravia, Notting Hill, Holland Park, Marylebone, Regent's Park, St. John's Wood and Hampstead.
Cordea Savills' experienced prime London residential team is complemented by the expertise of its parent company, Savills. As the largest adviser on prime London residential schemes, with specialist research, planning and development consultancy teams, Savills delivers a substantial range of contacts, relationships and access to deal-flow.
Patrick Carr, Director of Investment, commented: "This proposition is one of the most compelling in the property sector at the present time. It provides the opportunity to capitalize on the current development funding gap as well as benefitting from the strong capital growth forecast in the prime London residential market during the life of the Fund."
The Fund will be 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. The target fund size is £250 million with the first closing scheduled for January 2012.
Source: Citigate Dewe Rogerson