THE first property tracker bond has been brought out by BCP Stockbrokers. It is linked to the British property sector as represented by its five largest, publicly quoted property development companies.
Designed in association with Merrill Lynch Capital Markets with the capital guaranteed by Woodchester Credit Lyonnais Bank, this tracker offers the option of either a 3 1/2 year or 5 1/2 year investment term and requires a minimum investment of £5,000.
If you take the 31/2 year option you will be guaranteed a maximum of 75 per cent of the growth achieved by this BCP/Merrill Lynch Property Basket, while the 51/2 year bond returns 100 per cent of any growth achieved.
The "basket" of properties is represented by Great Portland Estates plc (10 per cent), Slough Estates plc (10 per cent), MEPC plc (20 per cent), British Land Co plc (20 per cent) and Land Securities plc (40 per cent). Their combined stock market valuation is currently £12 billion sterling with assets of £17.6 billion under management.
With the British property market well into recovery at this stage - house prices went up by an average of 8.4 per cent in 1996 with the property investment sector up by 9.6 per cent - BCP is confident that the three and five-year time frames attached to this bond should catch the rising property tide in Britain.
It points out that while equities historically out-perform property investments, property values are more stable. International stock markets are at, or near, an all-time high, it says, and while equity-based trackers have performed very well over the last few years, "we believe that the cycle has advanced to the point where it is property that will produce high returns over the next five years".
Any profits from this bond are paid subject to 26 per cent DIRT; the closing date is May 30th.
Anyone interested in this product - and undoubtedly there will be many since the property developments in Britain are easier to follow than the far-off stock markets represented by many conventional trackers - should seek out some independent advice before committing their funds.
There are some extra variables that should be considered, such as the possibility of a Labour government, the impact that European Monetary Union may have on the British market if Britain is not among the first members to join, and the impending millennium, which a few commentators believe could have an unnerving effect on some markets, if only in the short-term.
For more information about this bond, BCP can be reached at (01) 668 4688, or by e-mail: bcpiol.ie
