May 12, 2017
The Palmer Capital Development Fund IV builds on the success of the third fund, which invested £175m of equity in 15 projects between 2014 and 2016. Alex Bignell, head of UK at CBRE GIP, said the track record of the previous funds made it “an easy decision to launch a fourth fund”.
The new four-year fund will have the same two-year investment window as the previous vehicle, as well as the same target to deliver a 15% internal rate of return (IRR) for CBRE GIP investors.
Chris Button, head of value-add real estate investment management at Palmer Capital, said that although it was now later in the property cycle, the firm was confident of delivering the same returns because of the lack of competition for the type of deals it was pursuing.
“We believe that uncertainties in the property market and flight to prime assets will create buying opportunities for value-add investors, which we are well positioned to exploit,” he said.
The fund will explore three broad investment themes. The first is to acquire land with a view to securing planning permission for residential development, the second is to speculatively develop new regional offices and sheds and the third is to add value to standing investments through asset management.
Leverage will also be used to enhance returns up to a limit of 50% loan-to-value – although the gearing level is likely to be lower than this.
About £25m of the fund’s equity has already been committed across three acquisitions. The biggest deal is the £11.3m purchase from Tesco of Kingsmead Business Park on Howland Road in Thame, where the leases of the two main occupiers, DAF Trucks and Kubota UK, are set to expire this July and in 2018.
The fund has also bought 5.7 acres of land in Spofforth in North Yorkshire with a view to securing residential planning consent.
It has further acquired 125 acres of land on the south-eastern outskirts of Ayr, Scotland, for £3.4m. The land benefits from planning permission in principle for a mixed-use scheme that the firm will reconfigure to increase the residential component.