Arlington Property Investors, which was created through a merger of Arlington's investment management business with Aberdeen Property Investors in May, has unveiled its first fund.
The Arlington UK balanced property fund is a Dublin-registered Oeic that invests initially in a portfolio of 18 UK commercial properties. It aims to secure a high income yield with the potential for capital growth and can gear its assets by up to 50 per cent.
The initial portfolio has been valued at almost £40m and offers a spread of office, retail, industrial and leisure sectors. Arlington intends to add further properties to increase the value of the portfolio to £300m.The management team will draw on their contacts to find new investment opportunities - some of which may not be on the open market.
Although the fund will provide diversity, it will limit exposure to properties that do not produce an income or may not have income in the short term due to lease expiry. Speculative development and exposure to properties which need redevelopment will also be limited.
One of the problems with closed-ended commercial property funds that invest directly in property is illiquidity. The open-ended structure used by Arlington enables investors to redeem their investment on a quarterly basis, which could be particularly useful for Sipp and SSAS investors who need access to their money in the event of a divorce.
However, redemptions are subject to a maximum of 10 per cent of the total shares issued being redeemed in any quarter. This means some investors could be disappointed if too many investors redeem during that quarter but a dealing facility ensures that they would not be locked in to the fund. However, they would then have to sell their shares at a price which may be lower than the value of the underlying portfolio.