Like the first Fund, PLRDF II allows investors to share in development profits by investing alongside proven developers in off-market transactions.
Whilst PLRDF I focused on prime Central London, PLRDF II will capitalise on the fundamental shortage of housing stock in the capital by targeting mid-market (typically c. £500 to £1,250 per sq ft) residential developments in select locations where the supply / demand imbalance is most acute. The Fund aims to deliver a net return to investors of 15% - 18% IRR.
PLRDF II has had its first close following a c.£33 million investment by a major bank based in Singapore. The Fund is targeting an equity raise of £100-£150 million and, like PLRDF I, (which invested c.£100 million), a number of closings are anticipated over the next 6-9 months.
Patrick Carr, Fund Director, commented, “Only around 22,000 new homes were completed in London last year, well below the target of 42,000 required to meet demand, with the most acute supply shortage in the mainstream market. The development opportunities offered by London make it one of the most exciting investment stories in the property sector at the present time.”
Brian D’Arcy Clark, Head of Residential Acquisitions, commented, “Over the past couple of years much of the attention has been on the prime postcodes – there is a bigger story to tell in Greater London where there is a greater shortage of stock, proven demand and a pool of talented developers seeking funding to address the balance”.
PLRDF I was launched in June 2012. The management team used its market knowledge to identify at an early stage, assets that offered development opportunities, but for which there was a shortage of equity funding. The team made five off-market purchases of high-quality assets with a gross development value in excess of £250 million.
London’s economy is expected to grow by 3.3% per annum on average over the next four years, significantly outperforming growth expectations for other European cities. Based on forecast demand-supply of new builds, continued net undersupply is expected to support London property pricing in the medium term: the consensus among leading property firms is that London residential property will rise 28.5% over the next five years.(1)
PLRDF II 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 a further two years and will be able to use gearing where appropriate.
(1) Source: Savills, JLL, CBRE, Cluttons, Hamptons, Spring 2014
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