Garratt Property Group is bringing a residential property fund to the market, in the latest of several new launches in the property sector.
The Luxembourg-domiciled Garratt Residential Property fund will invest in properties bought at a 15% to 20% discount to their Royal Institution of Chartered Surveyors valuations. They will deliver average yields of 6% annually, the group estimates.
The Sicav fund targets an aggregate return of 70%-100% over its five-year term. This is based on expectations of flat growth in the market over the next two years, and then 5% growth for the following three years.
The management team will typically use gearing of 60%-65% of the fund’s loan to value to maximise the number of properties they can buy.
Garratt says the fund will benefit from the recovery it is anticipating in the British residential property market, pointing to figures from the National Housing Federation, which predicts that house prices will be 20% higher than current values by 2014, when the fund’s term ends.
However, its discounted purchases, rental income and use of gearing should ensure a return of about 35% even if the property market remains flat over the next five years, the group says.
The minimum investment in the fund is £20,000. It attracts a management fee of 1% and performance fee of 20%. IFA commission will be 3%, with 0.5% trail. The fund’s initial subscription period runs until October 31.