Mayfair Capital Investment Management - part of Swiss Life Asset Management - has launched a second London residential debt fund, Mayfair Capital Residential 2 (MCR2), as it prepares to close its first residential debt fund, Mayfair Capital Residential 1 (MCR1), following the realisation of its last asset.
MCR1 was launched in October 2012, in the wake of the financial crisis, and was designed to take advantage of the funding gap created by the withdrawal of lenders to prime residential development in London. Loans provided by the fund were either pure mezzanine or a combination of fixed-rate loans and profit participation.
'This fund was very well-timed in terms of the development cycle in prime London. The large houses were all sold before the adverse impact of the tax and SDLT changes started to take impact in the market,' said fund director James Thornton.
According to Mayfair, the net of fees returned to investors in the first fund is 16% per annum compared with the original target of 15% per annum. The equity multiple is 1.4 times.
MCR1 had exposure to prime houses in Bedford Gardens, W8 (sold for £26.5 mln), a prime house in Chelsea Old Church Street (sold for £18.5 mln) and an 8-lateral unit apartment scheme in Battersea with a gross development value of over £30 mln.
Developments away from prime core
Reflecting changes in the London market, the successor vehicle, MCR2, is targeting developments away from the prime core. It currently has exposure to seven projects, including flat and house developments in Worcester Park, Ickenham, Southgate, Wimbledon and Putney.
'These locations are more robust in terms of demand and give exposure to a more active sector of the market. This change in geographic focus is a logical adjustment to strategy in recognition of changed market conditions,' Thornton added.
The first close equity of £17 mln has been committed and Mayfair is now seeking to raise a further £30 mln from institutional and family office investors to enable the fund to gain exposure to 12-15 projects.
As with MCR1, by way of alignment of interest, directors and staff of Mayfair Capital have co-invested in the fund. Other investors include private investors committing through their pension schemes; a local authority pension fund; and a substantial overseas family.