Kreis Consulting has established a property fund that invests in two commercial properties in the UK.
The UK industrial income fund is an unauthorised exempt unit trust which aims to produce an income yield of 8 per cent gross a year. This is payable on a quarterly basis for between five and eight years, depending on whether the tenants buy the properties in year six or seven.
One of the properties is a tablet manufacturing unit at Swadlincote in Derbyshire. The other is a toiletries factory and distribution unit at Trowbridge in Wiltshire. Both units are pre-let to subsidiary companies of Beltpacker, which produces goods for blue-chip UK retailers.
The Swadlincote property is pre-let to Peter Black Pharmaceuticals, which produces vitamin and mineral supplements for companies such as Sainsburys, Tesco and Superdrug. The Trowbridge property is pre-let to Axxis International, which provides toiletries for major UK retailers such as Marks & Spencer.
This fund will borrow 56 per cent of the value of the properties through a mortgage with HBOS and repayments are fixed for the next 10 years. Kreis say that means any rise in interest rates will not lead to increased loan repayments, which would have the knock-on effect of reducing the income yield.
This fund is likely to be of interest to investors with self-invested personal pensions (Sipps) and small self-administered schemes (SSAS). Its moderate gearing is a positive feature and the avoidance of difficult areas such as the London office market could be a good strategy in the short term. However, the main potential downside is a lack of diversity, since it invests in just two properties within one area of the commercial property market.