Currently we are gearing up for a fund raising spree, with the first location being in Geneva, then London, followed by Mumbai and Bangalore. The aim is to raise money for our new fund which will be listed in the AIM Market with a target of £40m.
This is a relatively small amount of money in the scheme of things, bearing in mind this is a property fund, the City is used to seeing and digesting far greater amounts by property funds. I see this as a stepping stone and wish to ensure we improve as we go on. Our first fund which was launched on the 13th December 2013 has to date made a net return in excess of 20%, we will be following a similar strategy with the up and coming fund. The focus as with the first fund will be on trading properties over a short period of time this will give the cash flow and allow us to offer generous rates of dividends to the shareholders. Unlike the first fund we will also be purchasing and developing properties with a view of holding them. These will only be those we perceive to be very lucrative developments which have a good IRR from the outset compounded by locations where there is growth over the term of the development.
Investors who are sitting on good equity in property are those who were brave enough to purchase in and around 2009. This is when most people were sitting on the fence in regards to diving into property investment . During time of uncertainty is the time to strike not by following the masses. There are currently clouds on the horizon in the property market and there has been a perceivable shift in deal flow from only a few months ago.
It’s human nature to pigeon hole everything, this is also true of property statistics too. Everyone likes to say property has gone down/up X%. Even if you look at London there are many different pockets and each pocket has its own dynamics. Even during the credit crunch there were pockets which never went down in value and these were not only in Central London but also surrounding areas. Ethnicity has much to do with this, in areas where there is a high concentration of Jews or Indians living prices don’t generally tend to fall even during downturns.
My perception is there will be good deals to pick up over the next couple of years, and it will be the aim of this fund to capitalise on this anticipated downturn in the property market. The trading side will be less affected as you look at the current market value in comparison to the immediate purchase price and if the margin is wide enough you strike the deal. The exposure to the market is relatively short, typically your money will be out in a couple of months. A good example of this is a deal we recently purchased in Pont Street in Knightsbridge for £1.5m which comprised of a two bedroom property of 1,044 sq. ft. and a long lease of 85 years. We have already had an offer for £1.75m but being greedy people we are holding out for more, which if we do not get we will complete the deal and look to sell after a year for a price of£2.2m+ which will more than cover the added cost of stamp duty and holding costs.
It’s interesting to note the rental figure on this property is £850pw. Which although is a lot of money, it works out to a 2 .21% on a market price of £2m. Once you deduct letting and management fees and the high service charges you will only be able to cover a mortgage of£600,000 which is less than 50% of the purchase price. Yet people are falling over themselves to purchase here, I remember an accountant telling me he tells his clients not to invest in any thing which has a yield of less than 6.5%, I think he should stick to his job of doing accounts.
In preparation for the fund raising seminars I was asked to give a demonstration of my presentation by a PR firm we appointed after which I was decimated in a very diplomatic way and sent back to the drawing board to more or less redo the presentation.
The crowd we will be presenting to need no convincing about the greatness of property as an asset class, they have been investing in property probably since I was in nappies and possibly before then. Many of them have amassed property portfolios which run into hundreds of millions and so they did not need any advice in regards to property being a good investment. There are families who got into buying property after World War II and haven’t stopped since.
Information about why property is sound, and why one should invest in property consisted of a large proportion of my presentation, I was politely told to dismiss with this portion as it could be seen as patronising. Instead I was told the focus should be on why they need to invest with us, why is it we are unique.
The answer is the trading angle which requires a lot of ducking and diving and unless you’re in the location 24/7 it’s very difficult to do at arm’s length. This is some thing which is unique and apparently no listed property fund has a focus on. This can be easily demonstrated with our audited track record.
This crowd would need to see a proper structure and who’s sitting on this structure, so if one part falls away it would still be stable. They would be interested in hard examples of the last deals we have undertaken and the returns, as well as an emphasis on the macro economic outlook and how we would look to mitigate risk in the event of things not going quite to plan.
This is going to be a very different crowd to our usual crowd consisting of mainly Gujarati businessmen whom we have done business with a hand shake or a nod of the head, despite the paperwork this is what governed the business we have been doing.
Now we are entering a very different territory, one where you almost have to learn a whole new language and skillset, even though the product hasn’t changed.
The Real Deal
Purchase Price: £5.8m
- An off market development opportunity to convert a commercial building into four residential houses in a strong location which is rising
- Close to Marleybone station
- Planning permission in place
- Approx 6,100 sq. ft. area
- Scope of adding another 1,200 sq. ft. area subject to planning
- Expected resell price to be around £8.7m
- Or you can buy and hold
Call us now to reserve!
A Property Investment Company
!Tips of the Week
The rental yield in property is not where you make the bulk of your money, the capital growth is where you will see your money grow.
The market will not be rising in all locations from now onwards, therefore when developing property it is wise to have another exit plan besides reselling.