A former Quintain executive director plans to launch a property fund in Belfast, with a fundraising target of £100m.
Fund manager David Gavaghan, who was also chief executive of Belfast’s Titanic Quarter for nearly three years, aims to complete a first close of the 10-year Aurora Prime Real Estate Fund next year. The closed-end fund will focus on grade-A offices primarily in Belfast city centre, with build-to-rent and student accommodation also potential targets.
Aurora Prime Real Estate will work with Belfast-based venture capital fund Crescent Capital. It aims to invest most of its capital over the first five years and then dispose of the properties over the last five years, targeting double-digit returns.
Gavaghan led the development of the 185-acre Titanic Quarter scheme between 2012-2015. One of the world’s largest urban waterfront regeneration projects, Dublin-based Harcourt Developments has held the development rights to the site since 2003. Since departing as part of a restructure, Gavaghan has joined the Confederation of Business Industry in Northern Ireland as non-executive director. Previously, he worked at Quintain in London as head of fund management for two years.
“As Dublin prospers, and possibly overheats, and as London finds a new place for itself, there’s an opportunity for a place like Belfast and how it sits comfortably in that terrain,” Gavaghan said. “The banks remain cautious and rightly wish to see sensible levels of equity being co-invested in commercial real estate, so there’s a big opportunity for an equity fund in the future.”
Belfast’s office leasing market had a record year in 2018, with around 800,000 sq ft absorbed by new and existing occupiers. This year, the market is expected to achieve the five-year average of 400,000 sq ft – if two deals from IT giant Kainos and accountancy firm Deloitte complete before the end of December – according to data from Lambert Smith Hampton.
On the investment side, roughly £225m has been invested into the Belfast property market so far this year, with £74m of that being allocated to the office market, said LSH.
Despite the evident demand for Belfast offices, Gavaghan said the fund is unlikely to invest in speculative developments. “Given the delicate backdrop of the past few years, we believe the risk appetite among investors to consider speculative new build is limited. Our intention is to present investors with product that has strong tenants in good buildings.
“We know there are an increasing number of institutional investors looking at the Belfast market and they like what they see. Belfast today is a leader in financial technology, cyber security, as well as having a thriving professional services.”
Political blues
Gavaghan sounded a note of caution about the UK’s current political outlook, having already delayed the fund since a planned launch in 2016. “On the announcement of the referendum in February 2016, we decided to wait for its outcome before embarking on a roadshow. And, since the unexpected result in June 2016, this is where we remain – with all the vicissitudes since,” he said.
“Even today there is insufficient clarity about what Brexit will mean for Northern Ireland, particularly in the services sector, albeit both governments have been heard to comment that Northern Ireland could enjoy ‘the best of both worlds’. However, from an investor’s point of view, they will want greater certainty and as well as a return of a properly functioning executive – in relation to the latter, there are encouraging signs that an executive might be restored in the first half of 2020.”
He added: “Depending on the outcome of December’s General Election, we can then establish more precisely the final arrangements of Brexit in terms of what it means for Northern Ireland.”
Northern Ireland has now been without a government for nearly three years. The devolved executive and assembly collapsed in January 2017 owing to ongoing disagreements between the DUP and Sinn Féin. Subsequent attempts at restoring the institutions have fallen through.
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