New buy to let real estate fund will focus on London investment market

Written by Ray Clancy

Friday, 15 January 2010 09:23

A new real estate fund focusing on the buy to let investment market in London and aimed at high n et worth individuals is being launched.
UK listed property firm British Land, which owns or manages more than £11 billion of assets, will run the fund alongside King Sturge and Charles Russell Property Advisers. British Land themselves will also have a small stake in the fund.

The CR Property Fund aims to capitalise on the shake up in the private buy to let market, which has been affected by an oversupply of properties which resulted in a fall in rents. It expects to raise £50 million from investors initially, while there are plans to grow it to £300 million. According to reports the fund will seek to provide investors with a dividend above 2%.

It will focus on properties worth between £500,000 and £800,000 but a section of the portfolio will also be used to buy multi million pound properties. The managers are seeking to buy up to 500 properties for the portfolio with an aggregated target rental income yield of 3.5%. It is also understood some properties bought will provide capital growth.

The launch of a new fund targeting the buy to let sector has been welcomed. It is seen as a show of faith in the London property market. As it comes at a time when the pound remains weak against other major currencies, it is expected to draw a lot of interest from overseas investors.

CR Property Advisers said it believes that demand for prime residential property in London will remain strong and the new product offers investors a risk managed way to access this.

Richard Crosthwaite, director of property acquisition and management at Charles Russell, said King Sturge will concentrate on larger acquisitions while CR Property Advisers will focus on smaller acquisitions and one off deals. British Land will be responsible for managing assets held within the fund’s portfolio.

Crosthwaite refused to put a date for winding up the fund, but admitted liquidation in 2017 could be a possibility if the fund had reached the maximum amount of equity permitted in the fund. ‘It is not a seven-year fund, but it will have a seven year lifespan, when we hit our target of 100% return to investors. If it happens early we could liquidate early, but we could extend it if the market conditions aren’t right,’ he said.

Crosthwaite added that there were a number of reasons for launching the fund including the belief that the cash driven property market was unlikely to be maintained in 2010, throwing up acquisition opportunities. He said in the long term there could be a shortage of properties thanks to the effect of the credit crisis on building and lack of liquidity for borrowers, fuelling rental demand.