February 26, 2016
A fund raised by Palmer Capital in the depths of the recession in 2009 with investments from its own directors and senior figures at GVA Grimley, now Bilfinger GVA, has been relaunched as an open-ended vehicle.
The fund, which is changing its name from The Palmer GVA Limited Partnership to The Palmer Capital Income Fund, has raised £15m of fresh equity. Plans are now afoot for further capital raises and the target is to increase the fund’s size from £85m to about £150m in the next year.
It has already lined up two deals to invest the first tranche of commitments – an office in Milton Keynes, which it is buying for £10m, and a retail warehouse in Leeds, for £4m. Both properties are let on 15-year leases.
The two purchases reflect the fund’s strategy to invest in small prime properties in order to offer pension funds and wealthy individuals good income returns and some long-term capital growth. Its target is to deliver income returns of 5% a year and total returns of 7%.
Palmer Capital chief executive and investment committee member Alex Price said that the conversion of the closed-ended fund, which was voted through overwhelmingly by investors, would offer existing investors liquidity as well as provide new investors with a secure source of income.
“With relatively low yields from most asset classes, we believe it makes sense for our clients to buy long-dated income to deliver their core income return,” he said. “This would complement them taking selective risks to deliver capital growth from areas where there is a fundamental mismatch between supply and demand, such as city-centre residential”.
The average income weighted unexpired lease term is 11.4 years to expiry, getting on for double the IPD average of 6.8 years, with 50% of the portfolio benefiting from fixed minimum rental uplifts.
Palmer Capital holds stakes in seven regional property companies, which Price said would help supply newly developed properties for the fund.
The fund’s retained property adviser is Bilfinger GVA. Former GVA chief executive Rob Bould and senior director Neil Dovey were among the original investors in the fund, which now boasts CBRE Global Investment
Partners as its biggest investor, holding a majority stake. Price said that Palmer Capital had considered listing the fund as a REIT but opted to convert it to an unlisted open-ended vehicle rather than risk the volatility from which listed real estate stocks suffer.
Original link: http://bit.ly/1VIJakC
Author: Guy Montague-Jones, Finance Editor at Property Week