The Lincoln Diocesan Trust and Board of Finance Limited is injecting £10 million into The Charities Property Fund making the Trust the single largest investor so far.
Phil Hamlyn Williams, Secretary to the Trust, said "The Charities Property Fund addresses two major concerns for investors seeking exposure to commercial property. Being part of a larger fund, a proper spread can be achieved at the expense neither of lot size nor quality. Whilst many funds achieve this, the stamp duty disadvantage of investing in a non charitable vehicle has hitherto made yields unacceptable for a charity in need of high maintainable income."
The Fund has attracted £30 million from 80 investors, including 15 Oxbridge Colleges since its launch in September last year. The Fund is a joint venture between Savills Fund Management and Carr Sheppards Crosthwaite.
Charles Mesquita, Charity Specialist at Carr Sheppards Crosthwaite, says "Charities need as high and secure an income stream as possible, while protecting their capital against inflation. Property is an attractive alternative because as well as providing potential capital appreciation, it also provides a high degree of income security. This means it gives investors a much more predictable return in a time of economic uncertainty, especially in this low interest rate environment. Investing in property helps charities to reduce their overall risk by giving an alternative to equities, bonds and cash."
The Fund aims to achieve a minimum income yield of 2% more than the gross redemption yield on ten year benchmark UK government bonds (currently 7 - 7.5% per annum). The properties have been carefully selected to achieve the best balance of current yield and future capital growth. The completed purchases include a freehold office building in Bishopsgate, the City of London; a new business park office in Colchester; two retail warehouses let to Wickes and Magnet, and distribution premises let to the Post Office and Booker Belmont. The average weighted unexpired lease term for the whole Fund is over 14 years.
James Thornton, Head of Savills Fund Management comments ‘"The Charities Property Fund is exempt from Stamp Duty and so is a more tax efficient route for investment than the range of property unit trusts that are available. Property has outperformed both equities and bonds over the last 3 years and we estimate a total return (income and capital) of between 9% to 11% over the next 3 to 5 years."