Property syndicate model defying recession

ENTREPRENEUR Jan Fletcher said her property syndication business is gaining traction as pension funds and rich individuals increasingly consider investments outside London’s overheating market.

The businesswoman, who is currently embroiled in a High Court battle with Leeds City Council over the Leeds Arena development, revealed her Rougemont Estates business has completed its first property syndication and is rapidly gaining interest in its second.

The Harrogate-based firm recently bought English Heritage’s Grade II listed offices in York for £2.6m, bringing Rougemont’s total investments to £26m.

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Ms Fletcher said the syndicate model, which gathers sums of more than £25,000 and collectively invests them in commercial properties, is proving popular as bank and stock market investments deliver low or volatile returns.

“Even in a recession there are still opportunities in commercial property,” said Ms Fletcher, chairman of Rougemont Estates. “Investors looking for long-term secure income to support pensions or lifestyles can typically expect to get between six and seven per cent return compared with around three per cent from savings placed elsewhere.

“There are huge opportunities to look outside the London market to the provincial centres. Things are priced much lower so there’s the advantage of a much higher capital gain if you look beyond London.”

Ms Fletcher founded Rougemont in September 2009 with property investor and chartered surveyor James Craven. It initially focused on individual investments while seeking full approval from the Financial Services Authority, and began syndicating in April 2011.

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Roughly half of Rougemont’s client base comprises pension funds, with the rest wealthy individuals and family trusts, said Ms Fletcher.

Rougemont’s second syndicated investment is believed to be a Halifax Bank of Scotland office in Sheffield. This investment is currently almost 60 per cent reserved, said Ms Fletcher.

Rougemont claims three to four per cent of an investment as its fee, and property titles are held with private bank SG Hambros. Investors receive yields of six or seven per cent.

Ms Fletcher said the firm seeks investments in university cities with stable, long-term tenants, typically on 10-year leases.

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“A lot of our investors are risk-averse,” she said. “We are not buying anything with under 10-year leases. It has to be a medium to long-term view.”

The FSA’s oversight means Rougemont must provide the regulator with quarterly updates. However, the watchdog does not compensate investors in the event of a possible collapse.

Mr Craven, Rougemont’s managing director, said it has not had any defaults despite the tough economic climate. He expects property prices to increase over the next decade.

“We’re going to be in the real grind for the next few years but over the medium to long-term I think they have to go up.

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“We are trying to buy quality assets in quality city locations. It’s not a get-rich-quick scheme.”

Rougemont is also exploring syndicated development opportunities, where schemes are being held back by lack of bank funding. But he said finding stable building firms is proving the main hurdle.

Many property investments struggled during the downturn, as asset prices plunged and defaults climbed.

However, Stuart Law, chief executive of property investment adviser Assetz, said the sector is becoming increasingly attractive as values are often about 50 per cent below their peak.

“There’s a lot more value in this sector today than there was in 2009 and in the same way the risk has reduced,” he said.