The fund, available as a limited partnership and exempt unit trust for Sipp and SSAS investors, has a 25,000 minimum investment and will target returns in excess of 15 per cent a year over a five year period.
Large tracts of land will be bought then split into smaller plots of between 3 and 10 acres, which Cordea Savills believes is more attractive to property developers than larger plots. Improvements will also be made to the plots such as obtaining planning permission particularly if changing the use of the land from industrial or agricultural to commercial or residential putting in drainage systems, gas, electricity and telephone lines before the plots are sold to developers at a premium.
Cordea Savills has appointed a land developer, Cofton, as the primary asset manager. Cofton was established in 1972 and specialises in providing serviced lad for house builders. It has its own civil engineering team to carry out enhancements to the land.
The fund will focus on adding value to the land it buys though changing the planning use, refine planning consent,, installing the infrastructure and services, which may include building roads. Cordea Savills may also make joint venture arrangements with developers where land is sold in return for agreed share of sale s of the houses that are built on the land.
A seed investment has been identified for the fund a site in Norfolk currently owned by Cofton. This is part of a former sand and gravel quarry and is likely to be the first asset to be acquired by the fund, subject to due diligence and valuation. The fund is looking to acquire 7.8 acres of land totalling 7.722m but a 10% discount will be offered in return for Cofton having an equivalent share in the fund.
On a positive note, a slowing housing market may mean developers are less willing to hold large plots of undeveloped land, while at the same time more homes need to be built to meet demand for single occupier properties and starter homes.
Although this fund does not get involved in finding tenants, investing in land can be risky as values can rise and fall, while there is no guarantee that the required planning permission and enhancements can be made. However, Cordea Savills and Cofton are experienced in the land and property markets, so the due diligence they carry out should avoid unnecessary risks.