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Close calls for short-term opportunities

Close Property Investment is raising up to 10m for the sixth special opportunities fund, an exempt unit trust providing self-invested personal pension and small self-administered scheme investors with exposure to short-term UK property projects.

The projects will take up to three years to complete and will be redevelopments mainly be in the commercial property sector, although residential land dealing may also be included.

The fund will be geared and will have an opportunistic approach, which means it is difficult at this stage to know exactly how many properties it will invest in. A shopping centre worth 16m has already been identified as the funds first acquisition and other properties within the portfolio will each be valued at between 1m and 20.

Short-term properties were chosen as a contrast to longer-term property funds based on five-year rent reviews which then need another year or two to dispose of the holdings. The property managers also decided to raise the money before identifying suitable opportunities because the ability to make cash offers immediately will put the company in a better position to compete with other buyers. The intention is to give the properties a new look or new use to increase the rental income, then sell them to institutional investors.

This fund is ideally placed to take advantage of the increasing demand for property space as the economic recovery moves on, as a low rate of new developments will help promote rental growth on existing spaces. If rental yields start falling, the capital values will increase which is good for a fund investing in short-term projects.

However, the success of the fund depends not only upon finding suitable premises that can be redeveloped within a budget but also on the ability to find a buyer when the work is complete.

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