London-based Orchard Street Investment Management is set to announce this morning the creation of a special situations fund with The Government of Singapore Investment Corporation (GIC) in a tie-up that would target around £200 million (€243 million; $316 million) of UK commercial property.
This is the second time GIC has parked some of its vast sovereign wealth capital with Orchard Street, having originally committed to its first special situations fund in 2009, which went on to buy £130 million of property.
Later today Orchard Street will say its second Special Situations Commercial Property Fund will seek to invest across all the main sectors of the commercial property market and that, with debt, it will have an investment capacity of more than £200 million. The fund will have a six-year lifespan and will seek to make up to 15 individual investments over the next two years. It will include gearing of up to a maximum of 65 percent of the total value and will seek individual assets of between £15 million and £50 million.
The object is the same as for the first fund, which was to buy assets with active management potential for improvement.
The re-up underlines how GIC is mostly investing in Europe currently through funds or separate arrangements with smaller niche operators who operate ‘under the radar screen’. Currently, the sovereign wealth fund is very cautious towards Europe given the macro economic situation and the scarce level of debt financing. The sovereign wealth fund also believes the prime-end of the market is overpriced, according to Bernard Phang, head of European real estate investing who spoke at a PERE panel on distressed real estate at the Mipim property show in March.
Orchard was set up in 2004 and manages £2.5 billion of assets.