REAL ESTATE - Cordea Savills is to raise £50m (€74.5m) from pension funds to invest in acquiring and parcelling land for residential development.
Spokesman Steve Taylor said Cordea’s second opportunistic fund would target both pension funds and retail investors but added: "One institutional investor has deeper pockets than 100 retail investors."
Debt funding will account for up to 50% of the new fund, which will target an annual return of 15% over five years.
Taylor said that interest in the fund had come from European institutional investors, especially in Italy and Germany, as well as UK pension funds. "I shouldn’t have been surprised but I was," he said. "[Continental pension funds] aren’t our target market."
He said the fund faced "very little, if any" competition because most fund managers could not correctly assess the risk profile of potential investments.
"If you look at land bought by major house-builders over the past five years, how much of it didn’t come with planning consent? Virtually none. You need a reasonable degree – say 70% – of certainty over whether local authorities will support your planning application or not. It’s not about going out and randomly buying land. It takes due diligence."
Even without the issue of getting planning consents, Taylor said a shortage of expertise in enabling and parcelling land would put off likely competitors.
"It’s difficult to find experts in the field," he said.
"There is a handful of land-enablers and they tend to be with house-builders. As an investor, could you get a major house-builder to go out and buy you a great swathe of land? They don’t need the money."