Luxury residential property funds preempt recovery
Funds investing in high-end residential property are making a comeback as investors seek returns from undervalued prime property.
The Prime London Capital Fund which invests in prime central London residential property, is for the first time in a year looking to make new property purchases, it said today.
The £10m fund, founded and run by Stephen Yorke, buys short lease prime London property with less than 20 years leasehold remaining, as an attractive investment prospect. It has around 100 investors so far with a minimum investment of £1,000. It hopes to grow to around £30m within the next two years.
The assets of the PCLF is down 5% from the peak, suggesting the fund acted as a good defensive investment over recent months. Its units are up 8% since April.
Stephen Yorke, manager of the Prime London Capital Fund, said: “Prime London property values have bounced on the back of lack of supply, growing demand and Sterling devaluation. But that bounce only applies to long leases and or freeholds. Short leases in prime areas have not followed suit. There is a unique opportunity for the Prime London Capital Fund to take advantage for our investors as we have the professional capability and capacity to negotiate and make money on lease extensions.”
Long leases and freeholds fell 26% in value and then rallied 8% over the last two years. Short leases fell around 40% in value and have not really rallied at all, according to Yorke.
The news comes as high profile property developers, the Candy brothers, announced plans to float a £100m residential property fund targeting prime central London assets, over the weekend.
The fund will look to raise £50m of equity and will include 50% of leverage.
Some IFAs have suggested that investors look to re-invest in commercial property as prices delivered the largest capital growth in three years last month with a rise of 1.1 % according to the Investment Property Databank’s Monthly Property Index. Commercial property funds are still down 30% in value while some are still down 50%.
Last week asset manager New Star’s £650m flagship retail property fund said it is seeking fresh investments in the recovering commercial real estate sector for the first time in two years. The vehicle is now attracting between £20,000 to £50,000 daily on an overall net basis.
International agent Knight Frank said in its October residential report that prime London will lead the UK market recovery: “The key reasons for our confidence with regard to this market are: uniquely in the UK – London will benefit from the global economic recovery, which is likely to considerably outpace that seen in the UK; Sterling is set to remain relatively weak into the medium-term, encouraging international demand; the economic prospects in central London are brightening more rapidly than elsewhere in the UK, something we are beginning to see feed through into the employment market.”
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