Schroder Real Estate and Palmer Capital have teamed up to launch a new £125 mln (€141 mln) residential land fund targeting double-digit returns.
The Residential Land Partnership will acquire brownfield sites in areas of high demand for housing across the UK and then sell them on to housebuilders once planning permission has been secured. The five-year fund will target an annual IRR of 12% to 15%.
Schroders and Palmer have secured initial capital of £30 mln in a first close from a UK corporate and a local authority pension fund.
Andrew Robinson, head of capital raising at Palmer Capital, said the target returns are 'very attractive compared with the wider market', especially as the fund would be ungeared.
Schroders will act as the fund manager while Palmer will source deals for the fund through the seven UK property companies it currently invests in across the UK. It has already lined up a pipeline totalling about £40 mln in acquisition opportunities.
The typical lot size will be between £5 and £15m and the investments will be made across the UK, although there is likely to be a bias towards the South East because of the acute shortage of homes in the region.
Palmer's chief executive Alex Price said the company had been 'successfully executing this strategy since 2009'. Through vehicles such as the Palmer Land Opportunity Trust, which launched in 2012, Palmer said it had enjoyed a 100% success rate securing planning for 33 residential sites.
The fund is the seventh to have been created by Schroder Real Estate’s Capital Partners arm and takes the size of the Capital Partners platform to more than £1 bn.
