Assetz Fund Management is to lauch a new property fund providing developer finance for a 75m mixed use scheme in Ipswich.
The launch comes following the Finance Act on July 20, which confirmed that indirect residential property ownership is permitted within a SIPP.
The fund will help finance the landmark scheme, The Mill, a 75m new waterfront development in property hotspot Ipswich, on the site of a derelict 19th century grain mill, part of which is being retained. The mixed use scheme by developer Wharfside Regeneration, will comprise 334 apartments, 35,000 sq ft of retail space, a hotel/ student accommodation, dance studio and dedicated affordable housing.
The development is now under construction and will be completed within four or five years, but the risk to investors is greatly reduced by the fact that almost one quarter of the apartments are already sold off plan. The well-regarded Wharfside team includes Spencer Style (The Jam Factory, Southwark) and Brian Tanner (Royal Naval Hospital, Plymouth).
Developer funding involves providing equity to a developer in addition to bank lending, to finance a scheme. A developer typically requires 10 30% of the total scheme cost in cash, with the rest provided by bank lending. It is common to find developers with more opportunities than cash, which presents an opportunity for investors to raise the capital required and receive a priority return ahead of the developer.
Stuart Law, managing director of Assetz, says: With the passing of the Finance Act a few days ago, IFAs can finally reassure their investors that indirect investment in residential property is permitted within their pension, even where that investment involves developer funding.
This type of fund is an excellent way for investors to diversify their portfolios into residential property, accessing considerably higher returns than traditional funds since investors are benefiting from developer profits right from the start.
The fund will target investors looking for a hands-off approach to residential and commercial property investment, with a 50,000 minimum investment. The fund aims to raise 9.5m and will be backed by around 41m of bank lending.
Anticipated returns are in the region of 17 20% compound growth over the life of the fund. The investors receive a priority return, which means that they receive all the profits up to 15% return on investment per annum, after which profits are split between the investors, the developer and Assetz as a performance fee.
IFAs will benefit from an introducer commission of 3%, and Assetz will provide support through seminar presentations for IFAs and clients.