Property Syndication Model Doing Well Despite Tough Economic Times
Business is going well for entrepreneur Jan Fletcher, who runs a real estate business, successfully utilizing the property syndicate model, which pools sums of £25,000 upwards from individual investors and collectively invests them in commercial properties. The businesswoman, who is in a legal dispute with Leeds City Council over the Leeds Arena development, is convinced that the model has the potential to create opportunities for retail investors in commercial property even in times of recession. It might even be said that the current economic downturn is perfect for the model with prices down and many assets available at attractive prices previously unattainable. She said that it’s becoming more popular, because it delivers better returns than bank deposits and is more stable and secure than investing in the stock markets. With property syndication, investors can typically get around 6 or 7 percent return, significantly higher than the approximately 3 percent return from savings placed elsewhere.
Ms Fletcher also believes that there is a lot of potential and promise in the market outside London, especially with pension funds and affluent individuals willing to invest in the provincial centres.
“There are huge opportunities to look at outside the London market, in the provincial centres. Things are priced much lower so there’s the advantage of a much higher potential capital gain and rental return if you look beyond London.” Ms Fletcher said.
!m(/uploads/story/102/thumbs/pic1_inline.png)She founded Rougemont Estates in September 2009 along with property investor and chartered surveyor James Craven. The company started syndicating in April 2011 and it has already completed its first syndication. Rougemont recently finalized the purchase of English Heritage’s Grade II listed offices in York for £2.6m and it’s now looking for another investment, probably a Halifax Bank of Scotland office in Sheffield. Ms Fletcher revealed that the syndication is advancing, with almost 60 percent of the investment reserved.
Currently about half of Rougemont’s client base consists of pension funds, with the rest of the investors being family thrusts and rich individuals. The company takes 3 to 4 percent of each investment as a fee and investors get a 6-7 percent return. Property titles are held with private bank SG Hambros.
The company targets university cities with long-term potential. As Fletcher explained, investors are not willing to take much risk, so the firm is only buying properties with leases of 10-years or longer. This strategy corresponds with James Craven’s long term predictions for the market. Rougemont’s managing director expects that the prices will again go up within the next ten years.
“We are trying to buy quality assets in quality city locations. It’s not a get-rich-quick scheme.” Mr. Craven said.
And Rougemont is also looking to invest in development, where schemes are being held by lack of bank funding. The main hurdle here is, Craven said, finding stable building companies.
Yet, there is now much more value in this sector than there was in 2009, as Stuart Law, chief executive of property investment adviser Assetz, pointed out. And with the risk reduced the sector is becoming quite attractive to investors who see opportunities to build substantial profits in the long run.
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