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Trust Insider: GCP's growing family of high-yield infrastructure

by James Carthew on May 27, 2014 at 00:01

GCP tried financing the installation of small biomass boilers on commercial premises but it turned out demand was not that great, so it has recycled that money into other ventures.

GCPSL is a real estate investment trust that invests in student accommodation. The idea is that it generates a total return of 8-10% per annum and pays out an initial dividend of 5.5%, which grows in line with inflation. It only holds completed buildings (no assets under construction).

The first projects it acquired were Scape East, a 588-bed building opposite Queen Mary University in Mile End, and The Pad, a 116-bed building next to Royal Holloway, both in London. It has committed to buy a 140-bed scheme at the University of Surrey in Guildford that will be finished in Q3 2015, and is acquiring a 280-bed block in Greenwich near to Ravensbourne College.

GCPSL raised £70 million in its initial offering and the issue was well over subscribed. Right now it is in the process of raising a further £40 million to fund the acquisition of Scape Greenwich, and I would expect it to come back to the market looking for more in the future.

Targeting the Gulf

GCPSID was established to invest in infrastructure debt funding associated with projects in the Gulf region of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. The debt will be denominated in US dollars and the target is to produce a return of at least 7% and a 5% dividend yield.

The target was to raise up to $250 million but, unlike the other two funds, the GCPSID issue was undersubscribed, raising $125 million. The prospectus set out a pipeline of $350 million of potential investments power plants in Bahrain, Oman, Saudi Arabia and Abu Dhabi, and a university and a cooling plant in Abu Dhabi.

However, to date, the fund has not made any investments due to complications over its borrowing terms. It will be interesting to see if the premium now dissipates.

James Carthew is a director at Marten & Co

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