Garratt Property Group is boldly targeting an aggregate return over five years of 70% to 100% with its first Sicav, Residential Property Fund.
Scheduled for launch at the end of October, the fund will invest in below market value residential property, including houses, flats, new builds and property portfolios throughout the UK. The bulk of the 700-1000 properties will be rent-ready two to three bedroom houses.
It will look to target houses with an average 6% rental yield, and the aim is to buy these properties at an average discount of 15% to 20% from their current day Royal Institution of Chartered Surveyors (RICS) valuations.
The fund has been set up in conjunction with KMG Capital Markets Luxembourg with an aim to raise £50m to £100m. It has a five year term and minimum investment is £20,000. The fund carries an initial charge of up to 5% for institutional investors, with a 1% annual management charge. A performance fee of 20% is also applicable, though this will only be taken on profits after initial investor capital has been returned.
The fund will also use gearing to maximise the number of properties purchased, with an aim to ensure that the fund delivers a healthy return if the UK property market remains flat over the next five years.
Amanda McHugh, director of Garratt Property Group, cited figures from the National Housing Federation, which has predicted that house prices will be 20% higher than current values by 2014, when the fund’s term ends.
She said: “The fund was developed to give investors access to Garratt’s considerable experience of purchasing residential property at significant discounts to market value. It represents the smarter way to invest in residential property, a great opportunity for investors to gain exposure to a diverse portfolio of UK residential properties.”