Palmer Capital has launched a £250m value-add fund, marking its first fundraise since Canada’s Fiera Capital took an 80% stake in the boutique firm earlier this year.
The fund, Fiera Real Estate Opportunity Fund V, will target returns of 12-15% for institutional investor clients of CBRE Global Investment Partners. It will have a maximum six-year duration with a two-year investment window.
FREOF V will focus on logistics, offices and build-to-rent.
Palmer and Fiera are seeking to tap into a rise in demand for logistics space, predicting companies will be forced to review their supply chains once the UK eventually leaves the European Union and new trading arrangements are agreed.
The firms also expect that occupiers will increasingly seek more modern office space in the face of rapid technological change.
Alex Price, chief executive of Palmer Capital, said: “We need to create new assets that are fit for tomorrow’s purpose rather than repainting yesterday’s assets.
“Technology is changing the way we use real estate and making it more service-led. Before, we could create a box, people would come in, paint it and sign up to 15-year leases. Customers want more flexibility and staff want a better office environment.”
Price said the UK’s housing shortage was another driver behind the new fund launch.
“In terms of demographic growth, the Office for National Statistics says there are currently 66m people in the UK and this will rise to about 70m in 10 years’ time,” he said. “We are short of accommodation already, struggling to house the current population, so where will we find millions more homes in the next 10 years?
“For BTR, we will buy land, replan it, build out homes and then sell them on to institutional investors.”
The fund’s first close was on 8 November and it is already under offer to spend the majority of this undisclosed fundraise on BTR and logistics assets.
The fund’s next close will be at the end of January. Palmer Capital will then raise money each quarter until it hits the £250m target.
FREOF V will offer investors an extensive network across the UK through regional operating partners backed by Palmer Capital, including its BTR platform Packaged Living, which aims to develop more than 1,500 homes over the next three years. Current projects include Aubrey Place, a 300-unit BTR scheme in Milton Keynes. Having secured planning permission for the project in August, Packaged Living will start on site in the first quarter of 2020.
Unlike many firms in the BTR sector, Packaged Living acts as an investor, developer and manager. The business buys sites without planning consent, takes them through the planning process and then develops and manages them.
FREOF V is the fifth fund that Palmer Capital has launched for CBRE GIP. The previous four have invested a total of £600m in property.
Palmer Capital, run by founder and chairman Ray Palmer alongside Price, has added £800m to Fiera Real Estate’s assets under management, boosting the value to around £3bn. The firm is looking to double this to £6bn over the next five years.
Palmer Capital will rebrand to Fiera Real Estate UK in January.
Originally posted in Estates Gazette November 2019