Stamford Capital Investments (SCIM), has experienced strong investor demand with a capital raising for its SCIM Core Partners Fund 2 (CPF2), closing over-subscribed at $46.8 million.
Based on the innovative structure of Stamford’s inaugural Core Partners Fund 1 (CPF1), the new flagship Fund is a unique offering in the market. It primarily targets equity and subordinate investments focusing on the mid-development sector within the Eastern Seaboard for projects up to $80 million; a niche and strong performing sub-sector of the market. Mainstream asset classes are being targeted, primarily residential, retail, convenience retail, standalone fast food, office and industrial.
“We’ll do projects of reasonable scale in good locations, where we can limit the downside risk. We won’t be doing 200 units in Docklands,” Said Michael Hynes, Joint Managing Director.
“The construct of CPF2 is what differentiates it in the market. It unlocks the ability for us to underwrite positions and sell down as well as co-fund with our institution-al and private capital partners. It essentially provides a replenishable balance sheet for SCIM. Based on historic flows, we expect it will drive investment well in excess of $100 million,” said Daniel Pirrello, Head of Investments.
A rapid success despite the ongoing COVID-19 pandemic, CPF1 saw $27.5 million in capital raised and deployed into suitable investments within a 12-month period, predominantly into subordinate debt and equity positions. CPF1 has invested, re-invested and/or underwritten circa $44 million of transactions, including the underwrite and sell-down of two quality mezzanine debt facilities to high-net worth sponsors, behind a well-known second-tier bank.
Forecast net returns are 38% higher than initially projected at 18% IRR p.a., and SCIM has successfully repaid 81.7 cents/unit to CPF1 investors (inclusive of franking credits), with two remaining equity investments yet to be realised.
Critical to CPF1’s success and testimony of its capabilities, SCIM acquired, developed and divested Taco Bell’s new premises in the regional town of Orange NSW. Acquiring the 2,438 square metre site at 52-54 Bathurst Rd, Orange NSW for $1.75 million, SCIM and it’s development partner added significant value by securing a long term pre-commit from the parent company of Taco Bell Australia to lease the entire premises, as well as managing the approvals and builder for the landlord works program.
SCIM subsequently sold the asset in an off-market transaction to a private investor for a price of $4.7m reflecting an initial yield of just 3.8%, successfully returning in excess of 46% net IRR to CPF1’s investment.
“The asset strategy originally intended to be a 3 to 5-year hold when we assembled the transaction in late December 2020, however, we pro-actively pivoted to divest early as we saw the strong market appetite for properties with long-dated income streams to blue chip tenants, and realised incredible value for investors during the period of sharp cap rate compression.”
This record result was supplemented by a similar story with Taco Bell Tamworth, when SCIM took the asset to auction in September 2021 and achieved a sale price of just under $4.8 million reflecting a 3.77% capitalisation rate. The asset which features 1,792 square metre lot was acquired for $1.6 million in late 2020, and also featured a long-term pre-commit to Taco Bell Australia’s parent company.
This Fund is part of our post-COVID strategy, and the rapid support from our investors clearly reflects a strong appetite for structured commercial real estate in-vestment in the current market. The construct allows us to support our development partners at any position in the capital stack, deepening our capacity as a capital partner and becoming more than a trusted advisor,” said Michael Hynes, Joint Managing Director at SCIM.
SCIM has repaid over $400 million of principal across 60 individual investments, predominantly across the equity, preferred equity, and mezzanine debt space. Since its inception, SCIM has delivered an average net investor return in excess of 18.5% p.a. on funds managed.
The unrivalled flow of SCIM’s investment opportunities largely stems from the separate commercial real estate arranger division, Stamford Capital Australia (SCA). Despite the challenges of the global pandemic, SCA reached a milestone of $2 billion in settlements for the 2021 calendar year – double the volume for 2020.
To find out more please contact Michael Hynes.