Investment update: Opportunistic Fund

Political uncertainty has led to a slowdown in UK property market activity, creating ideal conditions for experienced investors to acquire assets at below market value, from property owners who need to sell quickly. In January 2019 our clients committed £2.1 million to the first Property Partner Opportunistic Fund. This is the first update on our progress deploying the funds.

On 8 March, we completed the freehold purchase of Phoenix Studios, Coventry. The property is a new build Purpose Built Student Accommodation (PBSA) block of 18 studios, located on Villiers Street, one mile from Coventry University and approximately 1.5 miles from Coventry city centre. Coventry is also home to Warwick University which is ranked 9 in the Complete University Guide.

We spotted the property for sale at auction, which is not a conventional route for selling PBSA blocks and an obvious indication that the seller was keen to sell quickly.

As we suspected, the property failed to sell in the room and we moved in to secure the property for £1.3m, below the auction reserve price of £1.35m.

The building was completed in December 2018, missing the traditional September student intake, but was fully let by the end of January as Coventry University has a number of courses which begin in January. The annual gross rent is £163,800, representing a very high gross yield of 12.6% against our purchase price, which we forecast will deliver a net rental yield of approximately 7.8%, enhancing performance alongside our targeted capital growth.

Our plan is to manage the building for 12 months to demonstrate a rental track record and secure a second year of tenants, which together with demonstrating that the building can be operated efficiently, we believe will materially improve value by 25%.

There are a few minor works to undertake, such as finalising the internet connection, erecting a rear fence, connecting the electric gates and adding a cabin for the laundry room. These relatively low cost items will improve the attraction of the building for the next intake of tenants, which will help drive rents and the resale value.

The opportunistic nature of our purchase of Phoenix Studios, Coventry reinforces the power of the Fund. We would have been unable to purchase the block without the Fund’s buying power, and the ability to exchange within a week and complete the week after that.

We are actively looking for additional properties to acquire within the Opportunistic Fund and will provide an update in due course. We are ready to secure gearing against Phoenix Studios in case this can be used to part fund future acquisitions to further enhance performance.

To go back to the quarterly close period update click here.

Capital at risk. The value of your investment can go down as well as up. The Financial Services Compensation Scheme (FSCS) protects the cash held in your Property Partner account, however, the investments that you make through Property Partner are not protected by the FSCS in the event that you do not receive back the amount that you have invested. Past performance is not a reliable indicator of future performance. Forecasts, if stated, are not a reliable indicator of future performance. Interest and capital returned may be lower than expected. Gross rent, dividends, and capital growth may be lower than estimated. 5 yearly exit protection, exit on platform, exit in line with a specific investment case or fund strategy, subject to price and demand. Property Partner does not provide tax or investment advice and any general information is provided to help you make your own informed decisions. Customers are advised to obtain appropriate tax or investment advice where necessary. Financial promotion by London House Exchange Limited (No. 8820870); authorised and regulated by the Financial Conduct Authority (No. 613499). See Key Risks for further information.