Providence Value Property Fund is launched
The newly-launched Providence Value Property Fund is a three year closed-ended fund that will invest in a range of residential, commercial and student properties in locations across the UK.
The fund’s strategy is to focus on locations that have large populations with a lack of affordable properties and to purchase the properties directly from the developer.
Investors will receive a protected annual yield of seven per cent. The yield will be protected through the receipt of upfront rental repayments on a lease back of each of the properties. The fund will be a cell of the LLP Property PCC Limited (PCC) and ordinary shares and loan notes in the fund will be listed on the Channel Islands Stock Exchange.
The fund will acquire property from developers at a minimum discount of 25 per cent to market prices based on the lower of two independent valuations, which means the value of the property should be unaffected by volatility in the property market.
The developers will assume any risk on the sub-letting and management of the properties by leasing back the properties from the fund on a projected yield of 9.2 per cent. The entire rent for the period up to the third anniversary of the fund is due to be paid upfront and will be netted off against the acquisition cost; this guarantees investors their seven per cent annual yield.
PF Advisors, the property adviser to the board of directors of the PCC in relation to the Providence Value Property Fund, has already identified transactions to purchase and lease back property from developer FreshStart Living, with a value of approximately GBP15m.
The properties are located in a variety of locations in the UK and include student accommodation, affordable housing and commercial property to form the basis of a fully diversified property portfolio. Each property will be scrutinised carefully by the board of PCC which will retain an independent property consultant to evaluate each proposed transaction.
Charlie Cunningham, former corporate finance director at finnCap and chief executive of developer FreshStart Living, is a director of PF Advisors.
Cunningham says: “This is a revolutionary property fund as it invests in a diverse range of performing assets, offering investors fixed protected yields.
“Other property funds rely purely on capital growth to ensure returns which is a high risk strategy in the current climate when many are overpaying for properties. The Providence Value Property fund not only benefits from a strong rental yield but because all property is purchased considerably below the market value, even if the property prices remain flat over the next three years investors will still benefit from equity returns.
“This is a compelling proposition for investors and the Providence Value Property Fund is bringing security to those who want to take advantage of the high returns that property investment can generate.”
Philip Gay, director of PF Advisors, adds: “I have spent over 30 years in the investment, development and management of property across a range of asset types. The fund will acquire properties based on a fixed yield rather than speculative buying and this gives me confidence that we will be able to deliver real capital growth for investors as well as the protected yield.”
The Providence Value Property Fund will accept minimum investments of GBP10,000 from private investors, pension funds, offshore bond providers, charities, trusts, companies, SIPPS and ISAs.
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