The £23m (about R280m) LCRRF is said to be the only closed-ended fund of its kind and offers investors a stake in upmarket properties in London. It is being listed on the Channel Islands Stock Exchange and has been structured for a maximum eight-year investment term, with early exit options available to investors.
"We have witnessed an increased demand for tangible assets from South Africa investors. This is a direct result of insecurities in world equity and bond markets, and has lead to property investments offering an alternative for many local investors," says Scott Picken, IPS CEO. "This has created a gap in the market, and IPS has strategically sought solutions to fulfil these market needs."
The fund will only acquire property in the Zone 1 areas of London, namely Knightsbridge, Mayfair, Chelsea and Kensington. Property management is being provided by London Central Portfolio Limited, administration by Fortis Fund Services (Guernsey) Limited and the auditors are BDO.
"After the properties are acquired, they are refurbished and leased to blue-chip tenants," says Picken. "Both rental income and capital growth are generated by capturing this opportunity at the bottom of the market cycle."
The goal for the LCRRF is 15% average growth per year, to double an investor's equity stake in five years. Forecasts put initial yields at 5% and this is what is being achieved in its first fund.
Another strategic significance is that finance has been prearranged from Fortis Bank at base plus 1%, therefore the LCRRF is borrowing at 1.5% and has the ability to fix rates as well.
Local SA investors have the upper hand in terms of the fund benefits. Non-resident and non-domiciled investors are exempt from Capital Gains Tax in the UK. In addition, the average annual growth projection of 15% excludes the anticipated 5% annual devaluation of the Rand.
"The low asset values, great financing structures, strong Rand and good yields are all positive precursors which all investors should consider," notes Picken. "Due to the current market appeal, we have extended the closing date for investment to March 2010."
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