THE Alltmore Commercial Property Fund launches this week, offering institutional investors as well as high net worth and sophisticated individual investors, an opportunity to invest in high quality secondary office pavilions and business parks around Scotland, expanding UK-wide from next year.
The Alltmore Commercial Property Fund has a minimum investment amount of £500,000 per investor, with additional tranches of a minimum of £100,000 possible. Investment capital must be committed for a minimum of five years, with a break clause at three years exercisable after giving six months’ notice.
The Fund launches with a seed portfolio of seven high quality office pavilions, located mainly in the Central Belt of Scotland. Therefore, new investors in this fund will be able to access returns immediately. These seven properties have consistently delivered a 7.5 to 8.5 per cent return per annum for more than 10 years whilst in the ownership of the current chairman of Alltmore.
All of these seed properties, which have been maintained to a very high standard, are located within the prime sector of the secondary locations offering easy access to all major transport routes within Scotland and guaranteeing access to key infrastructure and public transport facilities. The Scottish Government, Avant Homes, Colleges Scotland, Robertson Group, Bidwells LLP, Savills UK Ltd, Taylor Wimpey and Veolia Water are amongst the exceptionally high-quality tenants holding leases at these sites.
The extent of the ongoing management and capital expenditure being deployed ensures that there is an excellent opportunity to secure rental growth and capital value appreciation over the next few years. The Fund has set a target of attracting £50m of new investment capital by the end of July 2020.
The fund’s assets will be shared amongst investors through a collective fund structure which will be typically in the form of shares in a UK Limited Company. The Fund will be managed by A & K Asset Management Limited, whilst property management will be provided by Cowiesburn Asset Management LLP. Formed in 2009, Cowiesburn currently provides such services to properties across all sectors which are collectively valued at over £500m.
Alltmore sees a strong opportunity for growth in the secondary market in Scotland because there is such a shortage of new developments being approved north of the border. This fact creates significant and sustained pricing pressure in the primary sector which ensures stable and growing demand for secondary market commercial stock. This market dynamic makes it possible to increase rents and achieve the Fund’s target of 95 per cent occupancy levels on all buildings placed into the Fund.
The Fund’s experienced senior management team will focus on purchasing well-built commercial office buildings with a history of achieving a sound mix of high-quality long-term tenants, generating close to double digital yields and 60-70 per cent occupancy. Once purchased, Alltmore’s management team aims to add value to these buildings through more proactive lettings management and by securing longer tenure leases, rental growth and debt re-gearing to enhance capital values by 20 to 25 per cent. Lot sizes that Alltmore will be targeting to be added to the Fund will be valued at between £1m and £5m.
Bill Fleischmann-Allen, Head of Investor Relations at Alltmore, explains: “Whilst Alltmore is seeking to form long term relationships with suitable investment partners, the fund provides immediate access to an established, high performing portfolio of uncorrelated assets. Given current market uncertainties, the fund offers an opportunity to access a secure haven offering stable and consistent returns.
“The longer-term strategy will be to identify and secure new properties across the UK where the opportunity exists to add value swiftly in line with our business philosophy and experience. The aim will be to improve occupancy, leasehold agreements, tenure length, maintenance and more besides.”
Alex Innes, Legal Director and Co-founder at Alltmore, explains further:
“I have advised on the portfolio for many years and monitored its performance from outset. It’s clear that the assets have been acquired and managed very successfully throughout, in order to provide stable and consistent positive returns over a period in excess of ten years. I am equally confident that, with suitable investment partners, the team will be able to identify new opportunities where experience and expertise will be able to add value to new assets”.