MGPA has struck up a joint venture with another private equity-style fund manager for a speculative office scheme in the City of London, it was revealed today.
MGPA is funding the £35 million (€40 million; $57 million) acquisition and subsequent development of Telereal Trillium and Royal Mail’s Moorgate Properties in Fore Street alongside new partner, CarVal Investors, which is currently investing capital from its $8billion Global Value Fund.
The deal is notable not just for the plan to finance the construction of a 225,000 square foot office scheme without the safety net of a pre-let or indeed without bank debt. It is also noteworthy because MGPA traditionally has not entered into joint venture arrangements with other private equity firms or fund managers.
Speaking to PERE today, both firms explained how they decided to team up in an all-equity investment given the paucity of bank finance available for speculative development. At the same time, the two fund managers shared a common view that London as well as Paris would have a shortage of new office space in 2012 and 2013.
In fact, this is the second real estate joint venture the pair have announced in a matter of days. On 12 July, they unveiled the purchase, for an undisclosed sum, of the ‘Upsilon’ building in Paris which has permits for a 170,0000 square foot office scheme.
CarVal is a fund manager that used to be the proprietary, high-yield trading operation of Cargill, but it became an independent subsidiary of the agricultural giant in 2006. While perhaps not as well known in real estate circles as MGPA, the firm has invested $9.5 billion in the asset class since 1991. In Europe, it recently made a decision to focus exclusively on the UK and France, and has invested €400 million in the two countries in the last 18 months.
Robert Balick, senior managing director of Carval Investors UK, heads up its real estate investment activities in Europe having joined the company in 1997.
It is understood that while one of the investments made in joint venture with MGPA is coming out of CarVal’s $8 billion global value fund, the other is being made on behalf of a single client.