FREQUENTLY ASKED QUESTIONS
Brexit brings a certain degree of uncertainty, especially to the UK economy. This can potentially affect its property market, as well as the British pound. Despite the Brexit slowdown, the UK economy has been resilient – as shown by the 0.4% growth in its GDP.
On that note, the British pound will be subject to fluctuations during the course of negotiations. Our financing, done in GBP, is a natural hedge. Some of our investors also place hedges on their equity positions as well. Furthermore, the UK commercial property market is invested by many and when the pound devalues, more investors will be vested as these assets offer long-term stable returns.
The property financing is executed in British pound, hence that is a natural hedge. Some of the investors also place additional hedges on their currency exposures.
Our team has an extensive reach in the UK market, which enables us to unearth off-market deals. This allow us to build a portfolio of properties that are potentially worth more as a portfolio than as individual assets. There is also significant demand from property companies, private investors, or institutions for income assets. Alternatively, we will consider going to the capital markets as well.
Different assets require different management strategies. Some may be done through the re-gearing of leases, while others may require obtaining a change of use. The asset enhancement will typically be carried out either by ourselves or our partners.
As a fund, we are driven by numbers. Each asset needs to meet the investment criteria, and there should be an angle or story to it. In addition, it needs to add value to the fund. We will not acquire any properties that do not meet any of the above mentioned guidelines.
We have made a conscientious decision to engage Lighthouse Canton as our fund manager, to provide assurance to our investors that the fund will be managed in a manner that meets the strict investment guidelines that are set by the Monetary Authority of Singapore (MAS). This will bolster investors' confidence, especially for those who may be less familiar with such investments.
UK commercial properties offer a stable long-term investment return, and this is important especially given the investment cycle that we are currently in. Commercial assets are generally on longer leases, almost always on upwards-only rent reviews, and sometimes with indexation as well. In addition, service charges, property taxes, and insurance costs fall under the tenant's obligations. Hence, from a landlord perspective, our rents are triple net without any shortfall. This means that the fund's downsides are protected, with the benefit of long-term income and built-in rental growth. Most of the other investment jurisdictions do not offer such investment environment.
Investments, by their very nature, are risky, so we can neither guarantee returns or the principal amount. What we can do is to ensure that we acquire only the best assets, and carry out the appropriate business plans in order to deliver the target returns to investors.
We believe that our target returns are probably best in class for the type of assets that the fund invests in. These are very secure assets leased to strong tenants on a long-term contract, hence our target of delivering 6% dividend and 15% IRR is highly competitive considering the nature and low-gearing of our investments.
This is a closed end fund; hence investors cannot sell out during the holding period.
The residential market is very different from commercial. We prefer commercial properties as the occupancy is driven by business demands and as a landlord, we get the benefit of long leases with little or no non-recoverable expenses. This is something the residential market doesn't offer.