Financial Services
Product Providers
Commercial Property Funds
What are They?
As the name suggests, commercial property funds are investment funds which invest in commercial property. Property has been neck and neck with equities as being the asset class with the greatest returns over the last decade. There is no direct correlation between performance of equities and commercial property, hence holding investments in both asset classes gives a level of investment diversification.
Why Commercial Property?
• There are usually greater returns to be gained with commercial properties, than with residential property.
• Commercial property is not as sensitive to interest rate rises as the residential property market.
• Commercial properties are typically purchased with strong corporate tenants in place.
• Favourable lease terms can include upward only rent reviews.
• Long term leases allow for the onwards selling of the property after the investment term, with valuable tenancies in place.
• Active management of the purchased property, such as through the redevelopment of the property, increases rental yield potential.
• Favourable loan terms can be achieved, due to the level of borrowings. These borrowings are at hands length i.e. in the funds name not the individual investors.
Leveraged Funds
Although there are many property funds which do not use borrowings to fund property acquisitions, many investors seek commercial property funds which have a levels of borrowing (leveraged). Typically leveraged funds will use between 50% to 80% borrowings for the purchase of properties. At a level of 70% borrowings, the investor has increased the amount of capital invested by at least 100% (after purchase transaction costs).
During the investment term, the rent roll from the commercial properties purchased should be sufficient to repay the interest and perhaps some of the capital balance on the borrowings.
At the end of the term, the bank will be repaid the outstanding debt and the remaining proceeds will be distributed to the individual investors.
Leveraging the purchase, increases potential for greater gains when the asset in rising in value. Likewise, if the asset is falling in value, there is increased potential of loss of capital.
Products
You will find brochures below from a selection of commercial property funds. Although commercial property market returns have slowed since early 2007, there are some great buying oppurtunities where sellers have been forced to sell property assets following the credit crunch of 2007. Important factors to look for; a strong location which will be attractive long term, strong tenants, a healthy rental yield [4% plus], the potential for future improvements in rental yields and long term unexpired leases.
Note: The insertion of these presentations, should not be seen as a recommendation that any of the attached investments, is a suitable product for an individual investor. You should complete a financial review with your financial advisor prior to making any investment decision on these or any other investment product.
Germany
As Europes single largest economy, Germany has experienced a sharp fall in GDP, however with continued government stimulus and an increase in global demand for German exports, this exporting nation is starting to show signs that it is coming out of it's recessionary period. Despite a slowdown in economic activity, commercial property values have performed relatively well. 2008 total returns as per the IPD German property index was +3.5%, this included a reduction in capital values of -1.4%. This indicates the importance of rental yields for providing investment returns in German commercial property.
EPI TARGETS HIGH YIELD GERMAN PROPERTY MARKET
European Property Investments (EPI), the leading Irish-German Real Estate and Investment Advisory group, are seeking investors to invest in a mixed German property portfolio that is projected to return 6% net annually on their original investment with the potential for an uplift in their capital at the end of the investment term.
The portfolio includes a mix of residential and commercial property located in Berlin, Erlangen and Munich. The commercial tenants include Siemens, Areva and Recipe Chemicals whilst the residential properties carry attractive rental subsidies.
Since its inception in 2004, EPI have purchased more than €400 million worth of property in Germany in partnership with Irish investors.
For further details and for a copy of the Information Memorandum for this product please contact our offices.
UK
The office sector remains the main UK sector of interest through 2008, with London being the primary location for this sector. Many UK based life assurance funds have been forced to sell property assets to provide liquidity to their funds. There are relatively few buyers at present in the market, due to a lack of equity available to fund such large scale property purchases. Prices being agreed on these sales are indicating a discount to market valuations. Yields are increasing to a level of value and point to potentially strong capital appreciation when the financial & credit markets return to a more normal state.
If you have an interest in UK commercial property please contact us, as we have a number of funds available.
USA
It would appear that the US property cycle is at the bottom of a downturn. In addition the euro / dollar exchange rate allows for strong buying power at present. We do not currently have US based property funds at present, however if you have an interest in US commercial proeprty please contact us, as we can have oppurtunities from time to time.
Other Locations
We frequently promote syndicated commercial property funds with assets in mainland europe. If you have an interest in other european locations, please contact us for available funds.
** Note ** although we endeavour to update our web site content as frequestly as possible, the products above may be oversubscribed and / or closed. Please contact us to establish which funds are open for investment.
t. 1890 639639 . f. 045 533512 . e. info@arkfinance.ie