Mayfair Capital Investment Management, the UK real estate investment manager, today announces the final closing of its London residential development finance fund, Mayfair Capital Residential 1 (MCR1), with total commitments of £28.2 million.
At the second and final closing the Fund secured commitments of £12.5 million from a mix of UK pension funds, family offices and an Oxbridge college. The fund completed its first closing in October 2012 with commitments of £15.7 million. The directors and senior managers of Mayfair Capital have also increased their co-investment in the Fund.
The Fund primarily provides finance to developers in the prime London residential property market in the form of preferred equity. This preferred equity fills the funding gap between the developers’ equity and bank debt and represents, typically, 30-40% of the cost of a development.
The Fund is ungeared and aims to provide investors with a return of 15% a year from a combination of the fixed coupon of the preferred equity and a share in development profits. In addition the Fund has the ability to buy property directly, for instance ‘off-plan’, whilst also acquiring assets to benefit from ‘marriage value’ situations. It is expected to be fully invested by the end of 2013 in projects with a gross development value of around £200 million.
James Thornton, Chief Investment Officer of Mayfair Capital and fund director of Mayfair Capital Residential 1, said: “The Fund was created to take advantage of buoyant conditions in the prime central London market at present and in particular exploit the ‘funding gap’ where developers can no longer borrow up to 85-90% gross development value.
“Our model does not need price growth to achieve our target return, simply an active sales market. This looks set to continue for the medium term. We are planning for our investors’ equity to be returned to them within three years and, indeed, we expect to exit two of the first projects by the middle of 2014.”
Source: Mayfair Capital