Close Property Investment has brought out the fifth special opportunities fund, an exempt unit trust providing self-invested personal pensions (Sipps) and small self-administered schemes (SSAS) investors with exposure to UK commercial property developments.
The fund aims for a return of around 15 per cent a year by investing in up to seven commercial property developments over the next two to three years. Some developments may be pre-let but there is a speculative element as tenants for other properties will be found during the development phase or after completion. It will take each project between six months and three years to complete.
Close Property Investment will work with Palmer Capital Partners (PCP), a venture capital investor in small and medium sized property companies. Over the last eight years the company has completed 19 development projects where the end sale value has been between £1m and £5m.
PCP will secure the development site and appoint architects engineers and surveyors to design the buildings. Plannng permission and legal rights will be secured and building contractors will construct the properties.
. Close Property Investment believes the economic recovery, which will promote economic growth, is likely to increase demand for office, retail, leisure and industrial space. The company also thinks there is a short-term lack of new commercial properties as a result of the slowdown which followed the terrorist attacks in the US on September 11, 2001
Although many Sipp and SSAS investors could use this fund as a way of diversifying their portfolio, property development does have its risks. The refusal of planning permission and costly delays could have a negative impact on the fund and in the case of the speculative projects, void periods could occur while a suitable tenant is found which will reduce the fund's income stream.
Finally, a low interest rate environment is good for the fund as the fund can borrow cheaply to enhance returns. However, UK interest rates are expected to increase and this could affect investors' returns.