London-based real estate investment and fund management firm Grosvenor has launched its first fund targeting Australian property.
The firm plans to raise A$750 million (€565 million; $774 million) for its Grosvenor Office Partnership Australia with a first closing of A$400 million targeted for next year.
The fund is to be structured as a “managed club”, the firm said, which would be pre-seeded with three office properties already on Grosvenor’s balance sheet.
“Everyone prefers visibility,” Grosvenor Fund Management’s managing director for Asia, Morgan Laughlin, told PERE adding that the more traditional blind pool fund model was more “challenging” currently.
The fund is expected to attract capital commitments from about five large investors in addition to A$50 million of equity allocated by Grosvenor itself. “There are about a dozen names out there for which this would make sense,” Laughlin said.
Investment clubs have become something of a choice format of investing for some of the world’s largest institutional investors including the likes of China Investment Corporation , Future Fund and the Canada Pension Plan Investment Board, each of which have invested capital through such models in the past year.
Grosvenor’s Australia fund will be open-ended by nature although, as with many of its closed-ended counterparts, investors will not be able to withdraw their capital until eight years have passed. However, unlike closed-ended funds which would ordinarily come to a close at that stage, this fund will offer investors a liquidity review after which, unless there are requests for capital to be withdrawn, the fund would continue indefinitely. Laughlin said: “It is an open-ended investment vehicle offering the investor a window to ‘get out’ versus ‘to extend’.”
He said such a structure was appropriate for a core investing strategy, although the fund does have the capability to be 30 percent exposed to development and, as such, would target initial returns of more than 11 percent . He said unlike a traditional, closed-ended, opportunistic fund which is devised “by its nature” to be structured finitely to capture a specific investment theme or cyclical opportunity, Grosvenor’s fund should offer investors the chance to retain exposure to assets that do not come to market regularly. He said: “If you accumulate a high quality core portfolio, you don’t want to be forced to sell it off and have to start all over again.”
Grosvenor’s fund launch forms part of a strategy to evolve its Australian business, which was formed in 1967 as a direct investor, to a fund manager. The move follows a strategic review which concluded in April. Laughlin said: “In essence, we determined that our ambitions in Australia are greater than our capacity for pure balance sheet investing, leading us to the decision to transition our Australian platform to Grosvenor Fund Management.”