Mountgrange makes 20%-plus on exit

Mountgrange Investment Management, the London-based private equity real estate firm that raised £300 million (€342 million; $475 million) in 2009 for its debut opportunity fund and has made notable alternative real estate investments, has made an exit delivering an IRR of more than 20 percent, it said today.

The London-based company revealed it had exited its Poplar Investments Limited business to KMK Power SDN BHD, a subsidiary of energy firm KNM Group Berhad, for £25 million on behalf of its Mountgrange Real Estate Opportunity Fund (MoREOF).

In a statement, the company explained how the sale price equated to £455,000 per acre following the acquisition of the site in September 2010 for £15 million. The 55-acre site outside Peterborough in England was the first of MoREOF’s two investments in the renewable arena and the site has been sold with the benefit of a planning permission for the construction of a 79 megawatt energy-from-waste power generation plant.

Nick Berry, partner at Mountgrange, said the site had performed very well for the fund. “Strategic land for renewable energy remains an interesting area as we look at ways to apply our property asset management expertise beyond traditional asset types,” he added.

Mountgrange has been an exponent of alternative real estate investing since, with another example being a 2010 investment in a new hotel venture called Raag Hotels.The firm agreed to provide an undisclosed amount to build up a chain of budget hotels under a franchise agreement with Tune Hotels, which was started by Malaysian entrepreneur Tony Fernandes in 2007 and operates 11 sites in Asia.

That acquisition was announced after Mountgrange rose to prominence in UK private equity real estate in 2009 with the closure of its debut vehicle on £300 million, attracting more than 30 investors from around the world including the US, Canada, UK, Continental Europe, the Middle East and Australia. The capital came from endowments, pension funds, sovereign wealth funds, fund of funds, high net worth individuals and family offices.

Mountgrange said at the time it expected the fund to take advantage of depressed valuations in order to make opportunistic investments across a number of market segments. These included under-performing assets or portfolios and acquisitions, strategic land opportunities, and the creation of new platform businesses.

Manish Chande, a senior partner, said: “We believe there are opportunities in the UK which can provide substantial returns for our investors. Our task now is to bring these identified opportunities to fruition and maximise their underlying potential.”