Two former Anglo Irish Bank directors have launched a £500m fund that they claim establishes a new funding model.
Pat O’Hara and John Daly, previously directors in Anglo Irish’s lending division, have raised £15m of equity from the bank and a further £17m of equity from around 20 high net worth investors in Ireland.
They will keep the fund open for a further six months and aim to have raised a further £18m by the time it closes. Investors have so far taken either £500,000 or £1m stakes.
This £50m pooled equity pot will, with equity from joint venture partners, be geared to around 85% to invest in up to £500m of property.
The duo claim their fund is unique because they will not borrow from Anglo Irish, instead using a variety of third-party banks.
O’Hara explained: “We cannot be accused of providing cheap equity and expensive debt for jv partners. We put ourselves in the same shoes as the guys who come to us to do deals.”
It also differs from traditional syndicates in that it will put money into a series of investments and work the assets during the five-year life of the fund.
O’Hara added: “That gives investors access to a spread of different properties and managers.”
Partners will put in 30% of the value of the equity for deals, with the fund providing the rest, in return for a 50/50 share.
Called the Anglo Irish UK Property Fund I, it has already made four acquisitions, worth £108m, and plans to make at least another 20. It will target £10m-£60m lots.
In a joint venture with Robert Maxted’s and John Lorimer’s Parkwood Asset Management, it has bought two former Bourne End shopping centres for around £41m from Catalyst Capital.
With Stephen King and David Cooke, the fund also bought a 90,000 sq ft (8,361 sq m) retail park in Hull for around £10m; with Parkwood again it bought the Accrington shopping centre from REIT Asset Management for £28m; and in a joint venture with Chancerygate it has bought four retail parks in a sale-and-leaseback with MFI for £27m.
As independent consultants to the fund, Daly and O’Hara are no longer employed directly by the bank. Daly said: “It is scary at first not having that security, but it is exciting and something we knew there was a market for.”
O’Hara added: “The types of deals we have done and are considering are those where we can add value to the investment. We will not be seeking the traditional straight-finance, dry investments.”
References: EGi News 29/09/03
