Business Day (Johannesburg)
Thabang Mokopanele
30 June 2009
Johannesburg — WITH an eye to exploiting depressed prices in the UK commercial property market, financial services group Barnard Jacobs Mellet (BJM) and its property specialist partners, Cornerstone Asset Management, have launched an offshore property investment firm.
The CEO of BJM Private Client Services and executive director of British Capital, Jan van Staden, said yesterday that the aim of the new company was to capitalise on value opportunities in the stricken UK property market.
He said UK recessionary pressures, a bursting property bubble and a weaker British pound created an affordable "once-in-a-lifetime" opportunity for South Africans.
Local investors could optimise rand strength, hedge against future weakness and exploit depressed prices for UK commercial property.
BJM and Cornerstone are jointly acting as promoters of British Capital Property Investments, a closed-ended investment firm comprising of directly-held UK properties and some UK-listed property stocks. British Capital would target commercial properties in the City of London and West End.
The offer to subscribe for shares in British Capital opens during next month, dependent on Bermuda listing approval, and was expected to close at the end of August.
The firm would begin buying selected income-producing assets with limited exposure to letting risk in the second half of the year.
The minimum investment was £10000 with an investment term of five years, with the possibility of a two-year extension. The firm was structured to deliver a measure of income, but the primary focus was the pursuit of capital appreciation.
British Capital was registered in Guernsey and would be listed on the Bermuda Stock Exchange.
Van Staden said the offshore structure created access to BJM's institutional asset swap capacity, which means fund participation does not have to affect an investor's individual forex allowance.
"At transactional level - when physical property changes hands - London prices are down 50% from their peak in July 2007.
"Rapid re-pricing has taken property yields to 15-year highs," Van Staden said.
The price drop was caused by the credit crunch, while the dearth of finance drove up gearing. Some high-profile funds became forced sellers of prime properties to raise cash and ensure compliance with the terms of commercial loans.
"Our offer to investors and the projected commencement of our acquisition activities are timed to capitalise on a positive 'yield gap' while taking advantage of the anticipated property upturn. For once, international trends favour South Africans," he said.
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