Graphite books 2x on London property business

Graphite Capital, a mid-market buyout firm in the UK, has sold London Square, a London property development business, to Ares Management.

The precise deal value was undisclosed, but Ares Management invested £110 million of equity, according to a statement.

The sale has netted Graphite a 2x return and a 22.4 percent internal rate of return, according to a source familiar with the matter.

Graphite declined to comment on financials.

The firm backed the start-up of the property business in 2010 with a £100 million investment, comprising of £50 million of equity and £50 million of senior bank debt, PEI reported at the time.

Under Graphite’s ownership the business has grown significantly; it has completed housing developments in Shoreditch, Wimbledon and Ruislip. A development pipeline of more than £800 million provides the potential for further growth, according to the statement.

“With Graphite's support, the London Square management team has performed strongly since we established the company in 2010 and we are very pleased with the investment return,” Mike Innes, a senior partner at Graphite, said.

The divestment is the fifth exit from Graphite Capital Partners VII, a £475 million 2007-vintage. There are six portfolio companies left in the vehicle following this transaction. In May, Graphite sold Education Personnel, a provider of supply teachers and education support staff to schools in England and Wales, netting a return of close to 6x, PEI reported at the time.

The firm is currently investing its Graphite Capital Partners VIII, which closed on £500 million last year having spent just seven months in market.