Orchard Street Investment Management, the UK commercial property investment manager, and GIC Real Estate, the Government of Singapore Investment Corporation (GIC), have closed a six-year UK-focused special situations fund with a £200m buying power, which is to be financed with up to £130m in senior debt.
The Orchard Street UK Special Situations Fund II, which follows the joint venture partners maiden £130m special situations fund four years ago, has a six-year lifespan and will seek to make up to 15 individual investments over the coming two years, with the agreed debt likely to be matched in duration to the fund’s investment horizon.
The joint venture partners are likely to seek finance once properties have been targeted for the new fund, with preliminary discussions already under way with a number of lenders, including the Royal Bank of Scotland, which provided a £100m debt facility to the predecessor fund.
The senior debt sought is based on a maximum 65% gearing provision in the fund’s documentation, and will seek individual assets of between £15m and £50m, across all the main UK property secondary segments.
Chris Bartram, chairman of Orchard Street, said: “We are delighted that GIC has agreed to partner with Orchard Street Investment Management for a second time. The first Special Situations Fund launched in 2008, made its major investments in 2009 and has been a great success so far. We have enjoyed working with GIC and look forward to this new collaboration.
“The object is the same as for the first fund which is to buy assets with active management potential for improvement. This style of investment is an area of particular experience and expertise for Orchard Street, and which we believe has the potential to generate higher than normal market returns.”
Orchard Street currently has assets under management totalling £2.5bn.