Standard Life Investments has announced that it has successfully launched its UK Property Development Fund at a size of approx. €470 million (£334 mln) following the raising of approx. €235 million (£167 mln) in equity from a wide range of institutional investors.
Discussions are ongoing with two investors. However, limited opportunities exist to admit additional investors before the end of the discretionary closing period at the beginning of March, where equity in the fund will be capped at approx. €282 million (£200 mln).
The fund has three development projects under offer which amount to approximately €165 (£117 mln) of the geared capital of the fund. All three projects are prime town center office schemes where SLI forecasts occupational demand will be the strongest. With a maximum life span of seven years, Standard Life Investments expects the fund to be fully committed in three years with the aim to return proceeds to investors within five years. It is intended to have between five and ten projects thus ensuring a level of project diversification that will maximise potential returns while limiting specific risk.
The closed-ended fund will be geared 50% loan to cost and is managed by Daniel McHugh, Head of UK Property Development. The fund is designed to provide investors with access to commercial property backed alpha returns through a diversified portfolio of development projects and is aimed at UK and Overseas institutional investors.
It is anticipated that the fund should achieve an internal rate of return of 20% per annum for investors. Standard Life Investments has aligned its interests with those of investors through a fee structure that is performance orientated.
Daniel McHugh, Manager of the UK Property Development Fund, Standard Life Investments, said:
"I'm very pleased that we've managed to attract such high calibre investors in such a short time. In many ways it's recognition of our expertise and track record within the development arena and testimony to the strength of the investment proposition the fund offers.
"With a target three year investment period for the fund, I'm also delighted to announce that at launch we've secured projects that will commit almost a third of the fund's expected size. All three of the projects are quality prime office schemes; a sector which we believe will deliver the best development returns from the market. These developments should ensure that the key attributes of the fund are established from the very start - high absolute returns but with the risk diversified and managed through a portfolio of projects.
"We will continue to be active in seeking out further high quality developments before the end of the investment period, and I look forward to announcing these opportunities in due course."
Source: Standard Life