Pinder Fry & Benjamin is targeting small self-administered schemes and self-invested personal pensions with the introduction of the Gold 9 exempt unit trust.
This product invests in Becket House, a £76.9m office in London's Waterloo district that will be let to international accountancy firm Ernst & Young until 2026. The building was previously occupied by the Government, which means it will guarantee around 84 per cent of the current rent until 2014.
The trust has a target yield of 11 per cent a year, based on an estimated 3.75 per cent increase in the property's rental value over the next five or six years. This estimate was made by an independent source, property manager Cushman & Wakefield Healey and Baker, taking into account that the building is undergoing a £20m refurbishment which is expected to help rental growth.
The trust will borrow 81 per cent of the purchase price at a fixed rate of interest of around 6.49 per cent over 10 years. This equates to 1 per cent above the lending bank's cost of 10-year fixed funds. PFB believes this high level of gearing will work well as the London office market picks up over the next 10 years following the recent downturn.
FPD Savills' Central London Office Review and Outlook for March 2004 expects positive rental growth in this area by 2005, which adds weight to PFB's views.
Sipp and SSAS investors may see this product as a way of getting back into the London office market with tax advantages. They may be attracted by the quality of the current rent and the security of rental income provided by the previous tenant.
However, this is still a higher-risk investment as it is highly geared and invests in a single property rather than a portfolio, which would diversify the risks.