With the recent devaluation of sterling prompting renewed appetite from foreign investors, London Central Portfolio (LCP) is launching a new residential property fund.
London Central Apartments IV (LCA IV) will replicate the model of LCP’s previous three funds, investing in the mainstream private rented sector (PRS) in Prime Central London (PCL).
For the first time, the fund will offer income and capital return options for shareholders, to meet investor demand for distributions in a low interest rate environment.
LCP will officially launch the fund during a tour of South East Asia from 19-29 November which covers Singapore, Kuala Lumpur, Hong Kong and Bangkok. LCP will also be visiting the Middle East in February.
Despite some negative reporting on the outlook for PCL, LCP says the current dynamics are now ideal for investors to maximise their profit opportunity.
“Demonstrating a loose parallel to the global financial crisis, weak sterling and low interest rates will once again be a major draw for investors. Indeed, with most equity markets trading strongly, investors are generally in a much stronger position than in 2009, so we anticipate a high level of appetite for our new fund. Over the last couple of weeks, we have seen interest pick up substantially and despite the fact that we have not been marketing a fund, the number of investment enquiries has increased more than 10-fold, one of the factors prompting our decision to launch a new vehicle,” says Naomi Heaton, CEO of LCP.
LCP’s second fund was launched in 2009, when many commentators predicted a further slump in prices. LCP predicted a significant market rally and the fund is returning an annual IRR of 13.5 per cent.
Heaton says: “On the back of the political uncertainty caused by the UK election, the EU referendum and the introduction of swingeing residential taxes, the double digit growth seen in PCL since the Credit Crunch had tapered off by early 2015. Just as in 2009, this cooling off represents an excellent opportunity for the savvy investor to secure good value deals before the market picks up again.”
LCA IV will target returns in excess of 10 per cent per annum over a five-year period. It will cherry-pick properties with added value potential across all the prime postcodes. These will undergo a full refurbishment and interior design program to appeal to the mainstream rental sector. The minimum investment is from GBP25,000 upwards, subject to eligibility.
Alongside the currency-play and growth potential for the sector, LCA IV, a listed investment company, also offers significant tax advantages for investors, not available if they invest directly. It will not be subject to the forthcoming reduction in mortgage interest relief, nor the additional rate Stamp Duty. As well as providing buying power and diversification into this asset class, UK investors can benefit from using tax-efficient savings schemes such as SIPPs, SSASs and ISAs.
For the offshore investor, it is exempted from both non-resident CGT and the forthcoming look-through non-dom inheritance tax.
