Paloma Capital goes back to basics with debut £140m fund

Paloma Capital has closed its debut real estate fund after collecting £140 million from 21 investors. 

The fund, Paloma Real Estate Partners I, will be used to acquire large, multi-let warehouses and industrial portfolios located across the UK.

Paloma launched the fund in December 2015 and held a first close soon afterwards, having garnered around £98 million. The firm held three more closes, including one in June this year, before closing the vehicle after reaching £140 million. In total the fund will have access to around £300 million, including debt.

PERE understands Paloma is aiming to generate a 17.5 percent gross internal rate of return, which equates to 15 percent net.

A person familiar with the firm described the platform as an “opportunistic fund, investing in value-add style assets”. The person said Paloma would be driving value through capital investment, active tenant engagement and portfolio aggregation.

So far, the firm has already invested £78 million of equity, via 16 transactions, including acquisitions in Manchester as well regional locations such as Stockport, Redditch, Portsmouth and Sheffield. Paloma said the acquired assets had produced an initial yield of 8 percent per annum.

According to reports from January 2015, Paloma had originally targeted a fundraise of £150 million which, once leverage was included, would have taken its total firepower to £240 million.

“In a market where most investors seem obsessed by big shiny logistics boxes we have acquired 2.5 million square feet of smaller multi-let estates that are benefitting from exactly the same positive supply/demand dynamics, but at half the price per square foot and almost twice the yield,” said Joe Froud, Paloma co-founder and partner.

The firm was set up in 2015 by Froud, who previously worked at Columbus Capital and Schroders, and Jack Pitman, a formerly of Helical Bar. The two executives have more than 26 years’ experience in the industry and both worked as fund managers at CBRE Global Investors in the early 1990s.

The 21 investors in the fund range from large corporate and state pension funds, fund of funds and endowments through to family offices and high net worth individuals. In terms of geography, the investors come from the UK, Switzerland, Asia and the US.

Around half of the equity came from a pool of six investors which had previously committed capital to funds managed by Froud and Pitman’s previous firms.

The vehicle has a credit facility with Silicon Valley Bank and senior debt has been provided by Santander, RBS and Wells Fargo.

Paloma was advised by Greenberg Traurig on the fundraise with Lazard & Co acting as placement agent.