The prospectus was issued in mid-October and application forms are now coming in to advisers from their clients at a fast rate. Whilst most of the £9.5 million is allocated to existing advisers, there is still some capacity for new advisers interested in introducing the fund to their clients. It is likely the fund will close between the 1st and 15th of November.
As predicted, SIPP (Self Invested Personal Pension) investors have provided around 80% of the investment so far, with the remaining 20% coming from private equity investors.
Stuart Law, managing director of Assetz commented:
"With direct residential property investment no longer permitted in a pension and the rules concerning residential syndicates remaining unclear, SIPP investors are turning their attention to funds in order to diversify their existing portfolios to include an aspect of residential property.
"Taking profit out of the developer's side of the scheme is a different approach to property investment for most people. As they provide equity to a developer to help finance a scheme, it allows them to access a higher priority to the profits than the developer. Consequently investors profit much sooner than if they were to buy a property directly from the developer and hope it rises in value afterwards."
Savills, who were instructed to advise on the market value of the scheme, concluded:
"The Mill development comprises, in effect, an 'oven-ready' scheme where many of the risks associated with a development opportunity have been removed."
The 'Mill' scheme is a new waterfront development on the site of a 19th century grain mill, part of which is being retained. The mixed-use scheme, by Wharfside Regeneration, will comprise 337 apartments, 25,000 sq ft of retail space, a hotel/student accommodation and dedicated affordable housing. The development, construction is scheduled to commence in January 2007 and will be completed within 2 years, but the risk to investors is considerably reduced due to the fact that around one third of the units are already sold off plan.
The Ipswich property market is also considered a hotspot, as revealed by Knight Frank in its recent East Anglia Review, having experienced 194% growth since 1998. Similarly, Nationwide's report for the second quarter of 2006 stated that East Anglia was experiencing the highest rate of house price growth in England.
Minimum investment in the fund is £50,000 and anticipated returns are in the region of 17 - 20% compound growth over the life of the fund. Investors receive a priority return, receiving all the profits up to 15% return on investment per annum, after which profits are split between the investors, the developer and the property fund managers as a performance fee. Returns are not guaranteed, but the priority return arrangement means investors benefit before the developer or the fund managers. The fund will be backed by around £41 million of bank lending.
IFAs will benefit from an introducer commission of 3% and Assetz will provide support through seminar presentations for IFAs and clients.
