November 4, 2017
Schroder Real Estate and Palmer Capital have teamed up to launch a new £125m residential land fund targeting double-digit returns.
The Residential Land Partnership will acquire brownfield sites in areas of high demand for housing across the UK and then sell them on to housebuilders once planning permission has been secured. The five-year fund will target an annual IRR of 12% to 15%.
Andrew Robinson, head of capital raising at Palmer Capital, said the target returns were “very attractive compared with the wider market”, especially as the fund would be ungeared.
Schroders and Palmer are looking to raise a total of £125m for the fund and have secured initial capital of £30m in a first close from a UK corporate and a local authority pension fund.
The fund – the seventh to have been created by Schroder Real Estate’s Capital Partners arm – takes the size of the platform to more than £1bn. Schroders acts as the fund manager for all the funds and works with specialists such as property adviser Waypoint in the case of its Local Retail Fund and JLL for the Multi-Let Industrial PUT.
£40m acquisition pipeline
Graeme Rutter, head of Schroder Real Estate Capital Partners, said that the ability of Palmer’s network of UK property companies to offer “granular local access” was a key factor in Schroders’ decision to work with the manager.
“It’s the regional coverage and relationships with people on the ground that are really important for a fund like this,” he said.
Palmer will source deals for the fund through the seven UK property companies it currently invests in across the UK. It has already lined up a pipeline totalling about £40m in acquisition opportunities.
The typical lot size will be between £5m and £15m and the investments will be made across the UK, although there is likely to be a bias towards the South East because of the acute shortage of homes in the region. The fund will focus on mid-market projects where the homes would be available under Help to Buy.
Palmer chief executive Alex Price said the company had been “successfully executing this strategy since 2009”. Through vehicles such as the Palmer Land Opportunity Trust, which launched in 2012, Palmer said it had enjoyed a 100% success rate securing planning for 33 residential sites.
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