Mayfair Capital has completed the £28.2m final close of its London residential development fund.
The UK real estate investment manager secured commitments of £12.5m at the second and final closing of Mayfair Capital Residential 1.
Investors include a mix of UK pension funds, family offices and an Oxbridge college.
The fund completed its first closing in October 2012 with commitments of £15.7m.
The directors and senior managers of Mayfair Capital have also increased their co-investment in the fund.
The fund primarily provides finance to developers in the prime London residential property market in the form of preferred equity. This preferred equity fills the funding gap between the developers’ equity and bank debt and represents, typically, 30-40% of the cost of a development.
MCR1 is ungeared and aims to provide investors with a return of 15% pa from a combination of the fixed coupon of the preferred equity and a share in development profits. In addition the fund has the ability to buy property directly, for instance off-plan, while also acquiring assets to benefit from marriage value situations.
It is expected to be fully invested by the end of 2013 in projects with a gross development value of around £200m.
James Thornton, chief investment officer at Mayfair Capital and fund director of MCR1, said: “The fund was created to take advantage of buoyant conditions in the prime central London market at present and in particular exploit the funding gap where developers can no longer borrow up to 85-90% of gross development value.
“Our model does not need price growth to achieve our target return, simply an active sales market. This looks set to continue for the medium term. We are planning for our investors’ equity to be returned to them within three years and, indeed, we expect to exit two of the first projects by the middle of 2014.”
The fund has so far invested or committed to invest £22m in seven projects with a gross development value of around £150m, comprising:
• A three-bedroom apartment, purchased off-plan, in a development in Chelsea, as a joint venture between Native Land and Grosvenor
• A 9,900 sq ft family house at 5 Cresswell Place, South Kensington, which is being developed by Albyns
• An 8,600 sq ft family house with a mews house to the rear at 54 Bedford Gardens and 64 Campden Street, Notting Hill, which is being developed by Balmuir Partners
• Two apartments in Eaton Square, Belgravia, with a proposal to create a three-bedroom duplex apartment
• Eight luxury lateral apartments in Radstock Street, Battersea, which are being developed by Banda Properties
• The Clock House in Old Church Street, Chelsea, which is being developed by Albyns into a 7,563 sq ft home
• A 5,600 sq ft semi-detached house in Tor Gardens, Kensington, which is being developed by Balmuir Partners.
bridget.o’connell@estatesgazette.com
