Projected returns of 20% per annum over 3 years in a flat property market with proven Management Company. Ideal for personal and pension investment

Put together by proven Property Managers, with 64 previous partnerships from which our clients have benefited.

This partnership is focused on providing a profit for its investors by giving them the opportunity to buy in at the land purchase and planning permission stage, with strong tenants lined up to rent the properties as they are completed.

The key points are:

- Expected investment term of three years

- 20% per annum anticipated returns

- Overall developments must be 50% pre-let with no planning risk

- Individuals, SIPPs and SSASs can invest.

- Minimum investment £25,000 (for clients of Build Your Wealth)  

The partnership will initially acquire a portfolio of three commercial property developments in the UK, intending to provide capital repayments and profits in the medium term. The purpose of this Fund is to invest in UK developments by subscribing to loan stock and equity in different developments of the Property Manager.

The Fund intends to take a conservative approach to development, i.e. taking no significant risks on planning, having an overall requirement of developments being at least 50% pre-let (calculated by estimated rent) with no planning risk - all whilst targeting a significantly higher rate of return than may be achievable elsewhere, e.g. by investing in fully let investment properties.

The initial developments include:

1. New headquarters for Avon plc in Northampton with 15 year lease with annual RPI rent uplifts.

2. Industrial and office accommodation to be built for Tronic (guaranteed by FTSE 250 parent Expro International Group plc) as their new headquarters and manufacturing facility near to their existing facility in Ulverston.  25 year lease with 2.5% p.a. compounded uplift every 5 years.

3. A more speculative warehousing and distribution development in Newton Aycliffe where market research shows that there are insufficient facilities to satisfy demand. The project is fully specified and has planning permission to go ahead but there is no tenant agreement signed yet. It is expected that should the project be a success the return will be very high, whilst risk is limited to only 19% of the fund as a whole and is in any case shared with a Joint Venture Bank.

BYW Comment

Negative Viewpoint

• More speculative than purchasing completed buildings with strong tenants already in place.
• High gearing (as is usual with property development where a mortgage is taken) within the partnership magnifies the short-term risk.  If a pre-let tenant reneges on the contract or goes bust then the high gearing makes it more likely that the property be repossessed before another tenant can be found. 
• These are large bespoke developments on relatively small industrial parks making the potential pool of replacement tenants small.

Positive Viewpoint

• Two of the properties are already pre-let to high quality, long-standing companies whose probability of getting into such difficulty that they have to pull out of signed legal contracts seems small.  
• Gearing is within the partnership and the investor carries no liability on any partnership lending.
• With the Newton Aycliffe development there should be some tenant forthcoming, even if it means reducing the initial rent. 
• The best time to prepare for the next upturn is during a downturn, provided you are able to weather the downturn. Should an economic downturn be around the corner, the investment is at the land purchase and planning permission stage with the aim of benefiting from the commercial property market in three or more years' time.
• On the basis of no upturn in three years' time the projected profit is still high so this is a a higher risk, higher return investment, hence the projected 20% per annum over three years
  

This is effectively a business investment. Relatively speaking, compared to a broad-based fund, it is a good speculative bet for anyone who can commit funds for five years (although the expected return is over three) and as a part of their overall funds. Barring a disaster (e.g. Avon and Expro both renege on contracts leading to the loss of most capital due to repossessions) the potential is great and if there is an uplift in commercial property within three years, then the returns could be even higher.

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Not all areas of property investment are regulated by the Financial Services Authority. The Financial Services Authority does not regulate tax advice