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Time Investments launches first long income commercial property fund for retail investors

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TIME Investments has launched TIME:Commercial Freehold, offering retail investors the opportunity for the first time to derive stable, long-term income from investments in commercial freeholds.

The Fund leverages TIME Investments’ extensive experience to deliver a target distribution of 4 per cent per annum with the potential for capital growth.  Until this launch, long income commercial property funds were only available via funds aimed at institutional investors such as insurance companies and pension funds.
 
TIME:Commercial Freehold will invest approximately 50/50 in commercial freeholds with ground rents and commercial freeholds with long leases in the UK.
 
The Fund will be structured as a Property Authorised Investment Fund: an Open-Ended Investment Company (OEIC) specifically designed for FCA-authorised property investments. The tax benefits of a PAIF are similar to those of a Real Estate Investment Trust (REIT), including not being subject to tax on capital gains within the Fund. UK investors are taxed as if they had invested directly in the underlying assets. The Fund will also benefit from NURS classification, as an authorised fund thereby offering enhanced investor protection.
 
Commercial freeholds with ground rents benefit from long leases (typically over 60 years) on land and buildings, where a rent is paid to the freeholder by a leaseholder, who may sublet the property to a tenant. Ground rents are typically increased on a regular basis, either with fixed or RPI linkages, giving them in-built protection against inflation. The freeholder typically receives ground rents between 15 per cent and 30 per cent of the full market rent and has full legal title on the property. Any failure to pay the ground rent means the full benefit of the property reverts to the freeholder. Given the value of the property can be several times that of the freehold, the investment is over-collateralised. Furthermore, the leaseholder is responsible for maintaining the property so these costs do not affect the return to the freeholder.
 
Commercial freeholds with long leases are typically freehold properties let to commercial tenants at market rent for periods of over 20 years. The security within these investments is primarily linked to the quality of the tenant, the property and the location. Commercial freeholds with long leases tend to offer a higher income return compared to commercial freehold with ground rents. Compared to traditional commercial property investments with shorter leases they offer greater income security due to the longer length of lease, and will often have fixed or inflation-linked rental uplifts. 
 
The Fund will be managed by Nigel Ashfield, Managing Director of TIME Investments and Patrick Grant, Acquisitions and Portfolio Director, who has joined the firm from CBRE. Patrick has 20 years’ experience of advising institutional investors in long income property. Nigel and Patrick will be supported by an experienced team to assist with the acquisition and management of the properties. 
Nigel Ashfield and the TIME Investments team also manage the £230 million TIME:Freehold fund, which has built a strong 22 year track record of delivering a stable income stream and capital growth by investing in a diversified portfolio of UK residential property freehold ground rents. 
 
Ashfield (picture) says: “Many retail investors seek predictable income returns, continuous liquidity, inflation protection and prospects for capital growth. TIME:Commercial Freehold has been developed to meet each of these requirements by offering retail investors access to a property sector that has until now been restricted exclusively to institutions.  The target distribution of 4 per cent per annum is significantly in excess of the income available from other long income investments such as gilts and the targeted property has shown a lower sensitivity to changing interest rates.” 
 
The Fund has 18 retail and institutional share classes. The minimum investment for retail investors, including annual management charge for the retail class is 1 per cent and there is an initial charge discounted to 0.5 per cent.
 
TIME:Commercial Freehold may be suitable for direct retail investors, ISAs, SIPPs and SSASs, offshore bonds and family offices.

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