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.
