Second Estates has launched a new fund giving investors exposure to the booming UK holiday lettings market. The fund provides sophisticated investors, HNWIs and institutional investors with access to an alternative real estate asset class, offering a share in any rental income and increase in property values over time.
The launch of the fund follows Second Estates successfully securing its first tranche of investment which will be deployed into UK holiday let properties in the run up to the busy summer season. The fund is open for further commitments and has a target of up to GBP100 million in assets.
Investors in the fund receive a fixed rate coupon of 6 per cent pa, as well as further potential returns from property price increases and cash flow generated by the business. The fund has a target return of 12-15 per cent per annum, which includes quarterly payments of the coupon from year two onwards. The fund is exclusively for sophisticated investors, HNWIs and funds with a minimum investment amount of GBP10,000.
The UK holiday letting market is a high yielding alternative property class, which is so far untouched by institutional capital. Holiday let properties can produce yields of more than 12 per cent, significantly above traditional buy to let and student properties. Second Estates provide an easy way of investing in this asset class via a diversified portfolio of holiday let properties, acquired and managed by an expert team. This approach also provides significant cost savings from centralised management driving further returns for investors.
Tourism has boomed in the UK in recent years, with a weaker pound attracting an increasing number of overseas visitors and encouraging more British holidaymakers to take staycations. Tourists in the UK are increasingly likely to stay in holiday lettings and the sector has a higher proportion of ABC1 customers than hotels and B&Bs. The holiday lettings market is forecast to grow at a steady pace of 4.4 per cent year on year between 2012 and 2022. In 2012, it was valued at GBP2.3 billion and is projected to reach GBP3.5 billion by 2022. This provides a healthy macroeconomic background for investment with rental incomes increasing year on year above the rate of inflation.
Second Estates uses data-led insight and over 25 years of experience in this sector to locate the highest yielding properties and manage pricing and occupancy rates to maximise yields. In addition, Second Estates uses established third party to suppliers to renovate and manage the properties to minimise costs and ensure the portfolio delivers a high net yield. The properties are also furnished to a high standard to create a space that guests want to spend time in and return to.
Alistair Malins, CEO and Founder of Second Estates, says: “We’re proud to be the first movers in this market, opening up an alternative property asset class to sophisticated investors. The UK holiday lettings sector is booming whilst other property sectors are in the doldrums, making it a sensible choice for investors. Our fund targets top performing properties in some of the UK’s most successful holiday destinations, providing a strong underlying investment thesis.”
Clive Sykes, investor in Second Estates, says: “Whilst other areas in the UK property market have stalled recently, the holiday lettings sector has gone from strength to strength. The robustness of this market has made it a popular target for investment and Second Estates provides a cost effective and hassle-free way of gaining exposure to this fast-growing asset class.”