Cordea Savills has struck the first two deals for it its new £100 million (€123 million; $161 million) Prime London Residential Development Fund. The UK-based firm has selected two adjacent assets in Chelsea, west London – a neighbourhood popular with wealthy overseas buyers. Between them, the investments total around £40 million.
In a statement, Cordea Savills revealed how, in both transactions, it had teamed up with a private family office as a co-investor, the identity of which it has kept under wraps, and specialist ‘revival’ developer Tenhurst.
The sites in question are a former chapel and a former college building between the Kings Road and Fulham Road. Once developed, they are expected to provide around 65,000 square feet of new residential space. Both assets, when completed, will slot into the development fund that Cordea Savills launched earlier this year amid a dearth of financing from banks for residential property development.
Cordea Savills explained how the global financial crisis had left many developers unable to secure sufficient debt and equity to commence developments. This in turn had created an opportunity to provide financing that property developers needed to make starts on the projects.
“Ever since the banks made it clear that they were not prepared to lend on property development, at least on workable terms, there has been a dearth of development. This has led to a shortage of newly-built units in prime London locations despite ever-increasing demand,” said Brian D’Arcy Clark, head of residential investment. “One of the major attractions of acquiring both of these buildings is that they are highly complementary. By developing them together, not only will the finished flats be significantly enhanced, but there also will be significant costs savings in the development process itself and the subsequent running costs of the buildings.”
The Prime London Residential Development Fund is financing deals through discounted forward commitments, development equity funding in joint ventures with preferred development partners and the provision of mezzanine finance. Cordea Savills said the vehicle is particularly appealing to Asian investors who not only want to cash in on demand for prime London residential property but also want to benefit from favourable exchange rates. The fund, which has a target return of between 18 percent and 20 percent per annum over a four-year span, is expected to hold a final close sometime during the second quarter next year.