Commercial property is an important asset class to consider as a way of spreading or diversifying risk in a portfolio. Generally, property isn’t highly correlated to other assets classes such as cash, fixed income (bonds and gilts) and equities. If you would like to know more, RfM can provide an introduction to a specialist in commercial property investments.
Investors looking more closely at commercial property
There have been many recent articles suggesting the real estate investment market is beginning to contract. This certainly seems to be the case in the buy-to-let market. The Government’s new penal tax regime means investors are facing larger tax liabilities. This has led many investors to look more closely at commercial property which continues to perform well.
The sector has a number of attractive features. As well as the potential for capital gains, commercial property funds tend to pay a reliable yield, generated from the rent paid by tenants occupying the buildings owned by the fund. They are usually tied to long-term leases. This provides vital protection for any client concerned about a market downturn because – barring default – the rental income should still be received.
Asset-backed commercial property opportunities
RfM Accountants can provide clients with an introduction to a specialist in the field of commercial property investment. Taurus Asset Finance have developed a niche and successful track record of sourcing, structuring and financing bespoke, off-market, asset-backed commercial property opportunities, delivering annual distributions of circa 6%+ and an 8-10% IRR to investors.
They have been involved in commercial property transactions ranging from £2m to £250m for several years, and currently have in excess of £350m property under management. Their portfolio includes data centres, hotels, petrol stations, drive-throughs and university educational facilities.
Taurus structure and manage the whole process including, where necessary, the development and renovation of some sites. As an example, they renovated an old post office in Sheffield and the iconic Harland and Wolff drawing office in Belfast. These two developments are now the Sheffield Institute of Arts and the Titanic Hotel. The properties have new 35 and 25-year leases with 5-year, upward-only rent reviews.
Ways to gain exposure to commercial property
There are several different ways to gain exposure to Commercial Property with Taurus. These include:
- Capra Funds: these are a common way to gain in commercial property by investing with several other individuals into an SPV which acquires commercial properties, such as hotels, supermarkets, petrol stations, high street shops, offices and warehouses. These types of developments would normally be inaccessible to smaller investors. (Contributions from £50,000).
- Direct Acquisitions: for larger private investors and investor clubs, the preferred route is direct acquisitions of a property sourced to meet their individual appetite and needs. (Assets from £500,000 plus).
Typically, these are with brand name tenants (such as Starbucks, Greggs, Costa Coffee, Applegreen, McColl’s and Co-Op). In all cases, the assets have an emphasis on long leases with upward-only rent reviews.
As an example, the last Capra Fund owns a portfolio of four Applegreen PLC Petrol stations and convenience stores. These were structured on new 20-year leases, tapping in to their UK growth plans, and currently yields 6% to the investors with a predicted 160% overall return.
Taurus’ last direct acquisition was a drive-through Starbucks and Greggs in Hampshire. Once again, this was structured on new long-term leases, tapping into the UK growth areas of the drive-through market of both companies, and providing an attractive yield and potential capital growth.
Taurus continue to see and have access to excellent off-market deals similar to the examples above. These can be structured on an individual or collective basis with an emphasis on long leases and upward-only rent reviews producing an attractive yield.
If you would to know more about commercial property opportunities or arrange an introduction to Taurus Asset Finance, please contact Paul Newsham on 01772 431233 or by email to firstname.lastname@example.org.