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Property Fund

Discussion in 'Buying Overseas Property' started by laxmi, Apr 16, 2007.

  1. laxmi

    laxmi New Member

    I am looking Investors to invest in american based company's European Property fund, which is by private placement.
    Duration of fund- 6 years.
    Fixed Dividend 8% per annum
    Expected IRR based on past performance of AMC company 20%+
    Minimum Investment for Individuals- USD 50000.
    For institutions- 5 Million USD.
    fund is registered with REC, USA.
    LLP fund
     
  2. The Soup Dragon

    The Soup Dragon Senior Member

    That's not much to go on, though I appreciate it would take a while for you to provide a lot of detail on the offer. Consider what areas the fund will focus on and what its strategy is? Will it acquire land, obtain permissions then sell on or will it actually build properties? Once built, who will the buyer be? Will they be locals or people looking for a holiday home? Answers to simple questions like that can infleunce whether or not you like the fund.

    The first thing I would be looking to do is check the track record of the person running the fund. If that individual has record of delivering strong returns then great.

    There are many advantages of investing in a fund over becoming a developer yourself / owning property.
    - Less hassle for you. Once you have done your due diligence and signed up you can put your feet up.
    - Profit is made at all stages of the build. Funds allow you to share in that profit rather than simply look for house price inflation.
    - Economies of scale.
    - Local experience in the market.
    - You don't have to manage properties thousands of miles away. You have people on the ground that will take care of matters for you.
    - No language barrier.
    - Directors of funds often sit on boards of companies that produce the building materials. If that's the case with your fund then raw materialls will likely be secured well beneath the normal market rate.
    - Closed end funds where the shares can not be bought and sold like normal stocks and shares are not subject to stock market crashes.

    Do take a close look at how those that run the fund are renumerated. Ideally they will take nominal pay during the term of the fund and a slice of the profits on winding down of the fund.

    There are many such funds listed on Channel Islands stock exchange. These may suit you if there are one or two specific areas in Europe in which you wish to invest. I bought into the Oxford Property Development Fund last year. It is focussing on building medium to high quality accommodation for the local work force close to the principal cities in Estonia and Latvia. Assuming house prices remain unchanged and that no borrowing is taken to provide leverage then projections are that return will be greater than 30% per annum. The fund manager has a track record of delivering above his projections. (Leverage is one of the mechanisms he uses to do this.) He and his team have released a second such fund (imaginitively called the Oxford Property Development Fund 2.) The fund is likely to be closed soon (week or two) and it will be listed on the Channel Islands Stock Exchange shortly after that.

    Friends were also looking to invest in the same fund I went for, so I spotted an opportunity to set myself up as an intriducer and split the commission with friends if they went though me. I'd be happy extending that offer to anyone that contacts me through this forum. I'm also happy simply exchanging thoughts / research on the fund.
     
  3. bertie

    bertie New Member

    Hi Soup,
    Ya I am interested. I have been looking for these type of hands off funds. Just checked this fund on the web. Seems very interesting. Tell me more.
     
  4. The Soup Dragon

    The Soup Dragon Senior Member

    Hi Bertie

    More information on the following can be found in the prospectus. I’m happy forwarding it to yourself or anyone else.

    Oxford Property Development Fund 2 (OPDF2) will invest solely in Estonia, Latvia and Romania, with the focus being on Estonia and Latvia. (No more than 10% of the net asset value of the company, set up by the fund, will be invested in Romania.)

    The fund is focused on these countries as they have seen strong growth in house prices over the last few years and are expected to continue to see strong growth over the term of the fund (3.5 years.)

    As with many similar funds, the OPDF2 is being set up to minimise tax payable on profits made. Deloitte Touche advised OPDF2 of the structure to be taken.

    The key players in the management team all have good experience in their particular areas, coupled with local knowledge of the markets in which the fund is investing. Hadley Barrett for instance is involved in the management / development of over 1,250,000m2 of land for property. He is director of OPDF1, listed on Channel Islands Stock Exchange, and also two Tallinn (stock market) CSD listed private placements, all focused on Eastern Europe. Hadley also speaks fluent Russian. This gives him an edge over many of the smaller UK fund managers operating in these areas. (Much of the land in the Baltic countries is owned by Russians.)

    The fund will focus on developing residential property (approx. 80% of fund with other 20% on commercial property.) The focus will be on green field sites in commuting distance of the main cities. That way the fund can profit from changing land use permissions all the way through the build process to selling off plan. Target market for end product (residential units) are the local mid to high income population.

    The company will run a series of developments. The developments will be spread over different areas so as to reduce the risk of being over reliant on one localized market. Each development will result in a payout to the investors on successful completion (i.e. development makes profit.) The advantage here is that your returns are spread over the term of the fund, not simply a payout at the end of the term of the fund. (This can reduce the CGT you are liable for, depending on other assets you realise in that financial year.)

    Due to fund being closed and listed on a recognised stock exchange it can be placed in a SIPP. (Great if you have a SIPP – Gordon Brown will put in between 22% and 40% for every share purchased – exact amount depends on tax rate you pay and how much tax you have paid in recent years.)

    I invested in OPDF1 because its strategy mirrored mine – after two visits to Estonia I realized new build city centre apartments were expensive and that the ripple effect (rising house prices) was spreading out from the centre and some of the nicer suburbs. I visited property in OK and relatively run down areas and saw how locals were willing to pay a premium for both new build and renovated property. That killed my interest in buying an expensive city centre pad to rent out to tourists / visiting business men.

    Finally, the remuneration of those running the fund / company is ideal. They receive a basic wage so almost all of the money we inject into the fund goes towards the developments and making profit. Those involved with the fund take a slice of the profits and that’s where the real money they will make lies. 75% of profits gets distributed among the investors. The other 25% goes to those running the fund / company and the introducers, etc.

    Of course, I fully acknowledge that I have only highlighted some of the positives above. There are negatives too and I realise that most would prefer to own bricks and mortar with their foreign investment than shares in a fund.

    If you would like to receive the prospectus, send me a PM with your Email and I’ll fire it to you.
     
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