Property investment company Rougemont Estates is adding GBP10m of new acquisitions, including a GBP6.5m whisky maturation warehouse, to its GBP40m portfolio.
With another GBP6.6m deal currently in the pipeline, the investment business is confident of finding more “pockets of value” around the country over the next six months amid growing confidence in the commercial property sector.
Managing director James Craven says that despite fierce competition from major institutional funds, the firm is confident of buying more quality assets for its investors and continuing to deliver income returns of up to eight per cent per annum.
Craven says: “It is still difficult to find the right properties, but there are still pockets of value out there. There’s more confidence back in the market and tenants are beginning to commit to longer leases. We are also seeing a growing appetite among high net wealth individuals for this type of investment.
“With this type of investment there is a huge difference between the return on a government gilt, which is typically 2.5 to three per cent. Commercial property is delivering average returns of around six to seven per cent and we are doing better than that.”
Rougemont Estates, which is based in Harrogate, North Yorkshire, specialises in finding properties that can deliver predictable rental income from quality tenants. Risk is minimised by buying properties in prime locations that offer strong prospects for growth through lease renegotiation or property conversion.
Investments this year include a 120,000 sq ft whisky maturation warehouse near to Edinburgh Airport, which is backed by drinks giant Diageo on a 15-year lease. The whisky market has grown 80 per cent in the past decade and the warehouse has scheduled increases in rent, delivering an 8.75 per cent per annum return that is paid to investors quarterly.
Another investment was the GBP1.5m acquisition of Stamford House in York, which is home to the law firm Lupton Fawcett Denison Till. The property delivers a 10 per cent per annum return.
The next deal in the pipeline is a GBP6.6m prime retail unit in St Helier, Jersey.
“We wouldn’t typically consider retail investments as many UK ‘high streets’ remain fragile, however Jersey is an island with one high street, a queue of retailers requiring a presence and a captive market,” says Craven. “We aim to buy bullet-proof assets. There is still a significant lack of quality stock and you have to be careful, but we are still confident.
“We look to operate in a niche area, picking up properties that are too expensive for individual investors but that are too small for the big institutional funds. The big funds are coming in with such an impetus that they are driving up prices by competing amongst themselves. We don’t wish to play on their ‘pitch’ and consequently have been finding value in alternative property assets such as the whisky maturation warehouse and the current Jersey offering.
“We are being careful and selective. Syndicated property investment still offers a good, long term, predicted income stream above market level. Interest rates will be slow to recover and we are way ahead of what the banks can offer.”