Close Property Investment is giving experienced investors a chance to invest in UK commercial properties that will have rental increases of at least 2.5 per cent at the next rent review.
Fixed uplift properties is an offshore closed-ended fund that is also available as an exempt unit trust for self-invested personal pensions and small self-administered schemes.
The fund has a target yield of between 11 per cent and 13 per cent a year and will fund 68 per cent of its portfolio through a bank loan. The fund will invest in properties let to high quality tenants with leases that have at least 15 years left to run.
Sectors will be diverse, including industrial, retail, warehouse and office space around the UK, except northern Ireland. Buildings that are built for a specific purpose such as steel works, will not make it into the portfolio as it may be difficult to find other occupants.
The investment strategy of selecting properties only where rental uplifts are built into the conditions of the tenancy lowers the risk for investors by making this a certainty. Funds which may depend on rental growth to provide an income stream are to a large extent at the mercy of the market, which is influenced by factors such as interest rates - which can never be certain.
Investors stand to benefit from the commercial property sector because money can be borrowed to fund the property purchase at a lower cost than the income those properties are likely to generate.
Some investors may be concerned that recent interest rate rises will negatively impact on the returns of this fund, as this will mean it will cost more to finance the debt. However, this fund's bank loan is secured at a 10-year fixed rate, so short-term interest rate rises will not have an effect.