Asset Management Examples
Thatcham, Berkshire - Opportunistic
The Property Income Trust for Charities purchased a warehouse unit in December 2010 of 45,601 sq. ft. let to Arkema expiring April 2015 (5.75 years unexpired). The property was sub-let on a co-terminus lease to The Motor Insurance Repairing Research Centre (known as Thatcham) established in the area for over 40 years. The purchase price was £4.38m (net of costs) reflecting an initial yield of 8.82% to the Fund.
The sublease was simultaneously restructured (between exchange and completion) and extended for a further 10 years (15.75 unexpired) in return for a premium to the tenant. As a result the valuation increased significantly, valuing the asset at £5.52m (March 2010) with the yield reducing to. 6.75%.
25 Dover Street, London W1 - Capturing rising rental levels
The property was purchased in May 2006 for £5.4m by the MC Property Growth Fund. It was a small multi-let office investment where the average rent was around £45 psf. The reception area and common parts were refurbished and through the adoption of an active management strategy the top rent in the building was moved to £92 psf. The property was sold in August 2007 for £7.5m to show a profit on cost of over £1.5m for the short period of ownership.
This acquisition and disposal in a short time frame is a very good illustration of our investment style. The property was acquired on an 'off market' basis in a bull market and sold to the adjoining owner, Browns Hotel, who was a special purchaser. Accordingly, we exploited market imperfections for our investors benefit.
The Pavilions, Gloucester Business Park - Asset Management
This property was acquired on behalf of the MC Income Plus Fund in October 2004. It comprised 24,730 sq.ft of warehouse space let to three tenants but occupied solely by Serco plc. In March 2008 surrender premiums were paid by two tenants and terms for three new leases to Serco signed. The planning consent was also widened from B8 to B1 offices. The overall rent was increased by £70,000 per annum and the impact was to increase the valuation by 35%.
MC Growth Fund - Market timing
Recognising that the property market was nearly at its peak in the spring of 2007, Mayfair Capital decided to liquidate its first fund, the MC Property Growth Fund (earlier than scheduled). We therefore disposed of £50 million of property and returned equity plus profit to the investors. Over the 4 year life of the Fund we returned 16.69% p.a (post performance fees), a more than doubling of the original equity invested.
Performance Disclaimer
Past performance is not a reliable indicator of future performance. Any information contained herein is not to be relied upon as authoritative or taken in substitution for the exercise of judgement. The value of investments and the income from them may go down as well as up, and investors may not get back all or any amount originally invested. Further, investments may be highly leveraged thereby increasing the potential amount of loss. Notwithstanding any statement herein, Mayfair Capital does not exclude or restrict any duty or liability that it has to its clients under the regulatory system in the United Kingdom.
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