Property fund portfolio includes six prime UK retail properties

InvestmentFunds: Irish pension investors who want to tap into the UK property market but who don't want the bother of searching for properties themselves might consider a new property investment fund launched by Friends First. Its sixth property fund offer involves a portfolio including six prime retail properties in four UK cities.

The company's Insight Property Fund 6 is structured as a unit linked pension fund and is open to private pension investors for a minimum amount of €50,000. Eligible investors include group pension schemes, small self-administered schemes, directors of trading companies with more than a 5 per cent shareholding, self-employed and professional persons, approved retirement funds, and pension transfer bonds.

The fund is acquiring a prime €29.4 million (£20 million) UK retail property portfolio "off-market" from a British life assurance company. The six properties are all prime retail high street locations, with a view to reducing exposures due to unlet properties.

The four urban centres are Wolverhampton, Plymouth, Bristol and Nottingham. All are located in "top 50" retail centres, according to Friends First, and are 100 per cent let and producing income.

The gross purchase price including stamp duty is €31 million (£21.13 million) and the net portfolio income is €1.63 million (£1,108,650) per annum, Friends First indicates. This gives a net yield of 5.25 per cent at time of launch.

The fund will operate as a closed six to eight-year fund with no exit allowed during this period. It is categorised as a medium risk fund, as it has a 65 per cent gearing, with 65 per cent of the cost financed by debt (€19 million - £13 million) and 35 per cent (€12.166 million - £8.33million) by equity.

Debt financing is at fixed rates, so interest rate changes won't be an issue during the life of the fund, says Friends First. Weighted average unexpired lease terms stand at 10.75 years and there is full tax exemption on income and capital gains from the assets in both Ireland and the UK.

The shops occupying the six sites include Going Places Leisure Travel Ltd, Kurt Geiger Ltd, Topshop Ltd, Currys Group Ltd, New Look Retailers Ltd and Maplin Electronics Ltd.

The fund's promoters argue that retail property investment remains the safest sector of any on the property front.

The UK commercial property market has outperformed UK equities and gilts over the last one, three, five and 10 years and total return on UK commercial property for 2004 was 19 per cent, with a 10-year average of 11.2 per cent.

Friends First has invested more than €500 million in UK property investments on behalf of Irish investors over the last five years.

"The UK market has shown itself to be particularly successful and we have concentrated this product in the retail sector across four key urban centres," states head of marketing at Friends First, Eamonn Twomey.

The Insight Property Fund 6 is available through the broker network or directly from the company.