Tag Archives: income
Investors Club Together For Commercial Property
http://www.ft.com/cms/s/0/2afa94e4-108a-11e3-b291-00144feabdc0.html#ixzz2doq5uDB1 August 30, 2013 By Tanya Powley Private investors are returning to the commercial property market by clubbing together to benefit from the improving outlook for real estate. While property syndicates fell in popularity during the downturn as prices plunged by up to 40 per cent, rising capital values have resulted in revived interest, say advisers. Commercial property syndicates allow a group of people to invest directly in real estate. The advantage of investing this way is that individuals can gain direct exposure to a higher-priced commercial property than they could buy on their own. According to IPD, the property value benchmarking group, capital values rose by 0.4 per cent in the second quarter of the year, halting an 18-month decline in which average values have fallen 3.5 per cent since September 2011. In response, property funds saw inflows of £140m in July 2013 – the highest level since July 2010, according to data from the Investment Management Association. In comparison to funds, syndicates are typically used by wealthy individuals or sophisticated investors with large amounts of money to invest. “They are a new slant on risk mitigation that entails the pooling of resources for investment in expensive commercial real estate assets,” said Simon Cookson, partner and head of UK real estate at DLA Piper, the law firm. “This pooling of resources is a fairly new phenomenon. . . It is often used to fund the purchase of high-profile or ‘trophy’ assets,” Mr Cookson added. Many private banks offer property investment syndicates to clients. HSBC Private Bank last year bought Broadgate West, an office in the City of London, for £290m on behalf of investors in its HSBC Club Programme. It has also bought an office building in Times Square in New York. “Since founding the HSBC Club Programme we have been able to provide HSBC clients with direct exposure to otherwise inaccessible real estate opportunities globally. The strong take-up from investors is certainly testament to the quality of the assets we have acquired,” said Paul Forshaw, head of real estate fund management at HSBC Alternative Investments. Time to add commercial property to your portfolio? Commercial property Five years on from the start of the downturn, the fortunes of the UK’s commercial property market remain extremely varied . . . Some property syndicates only purchase property in the UK, such as Ratcliffes, the chartered surveyor. It buys a property – typically a prime retail building – and then markets it to a number of its registered investors, breaking the gross purchase cost into a number of shares. Share sizes are rarely less than £25,000 or more than £250,000. According to Anthony Ratcliffe, about 40 per cent of its clients invest through their pension schemes, while approximately 25 per cent are property professionals themselves. “As the property market begins to stabilise after several years of falling values there is a revival of interest, attracted by the income returns which at about 6 per cent plus on well-tenanted property look very attractive against bond and cash returns,” said Mr Ratcliffe. Darius McDermott of Chelsea Financial Services, the financial adviser, said investors need to understand the risks involved. “It’s not an investment route I would suggest for the majority of people as minimum investments are generally substantial amounts, the investor just picks the property but has no control over the asset and the costs can be high, as they need to cover legal fees and other sundries,” he said. It’s also a very illiquid investment and, unlike a fund or investment trust, is not regulated, he added. Ratcliffes charges 1.25 per cent of the property purchase price, 1.5 per cent of the property sale price, 5 per cent of the gross annual rent for the property management and syndication administration and 7.5 per cent of the annual settled rent for a rent review. Mr Ratcliffe agrees there are risks, noting that a few of its syndicated properties where leverage was used are now at values below the level of debt due to the recent property crash. According to Mr McDermott, most investors will enjoy cheaper and more diversified access to commercial property through a fund or investment trust. He recommends the L&G UK Property fund. ——————————————- Paifs offer hopes of higher returns Investors now have additional choice as funds convert to new tax-efficient structures known as property authorised investment funds (Paifs). A Paif allows funds to pay gross dividends from property rental income with no corporation tax deducted. Only holders of individual savings accounts (Isas) and self-invested personal pensions (Sipps) and other pension investors can invest in a Paif. While the structure was introduced by HM Revenue & Customs in 2008, M&G Property Portfolio became the first large property fund to convert in January this year. This week, Standard Life Investments announced it had converted its £471m UK Property Fund into a Paif. According to Andrew Jackson, head of wholesale and listed real estate at Standard Life Investments, the estimated yield on the fund will increase from 3.61 per cent to 4.52 per cent for investors. Mr Jackson said: “In an environment of low growth and low yields, this is a particularly relevant time to provide long-term investors with an opportunity to access a more tax-efficient, diversified source of income through investment in real estate.” Continue reading
Survey: Farmland Values Continued To Rise In Second Quarter 2013
Farmland values continued to rise during the second quarter of 2013, according to the latest Agricultural Finance Monitor published by the Federal Reserve Bank of St. Louis. August 15, 2013 Farmland values continued to rise during the second quarter of 2013, according to the latest Agricultural Finance Monitor published by the Federal Reserve Bank of St. Louis. Farm income, as well as capital and household spending, also increased slightly compared with a year ago. The survey for the report was conducted from June 11 through June 28, 2013. The results were based on the responses of 48 agricultural banks located within the boundaries of the Eighth Federal Reserve District. The Eighth District comprises all or parts of the following seven Midwest and Mid-South States: Arkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee. Farmland Values On average, Eighth District quality farmland and ranch or pastureland prices were higher than first-quarter 2013 and second-quarter 2012 levels. In addition, many lenders reported that they expected prices for quality farmland and ranch or pastureland to increase in the third quarter relative to the third quarter 2012. Quality farmland prices averaged $5,672 per acre in the second quarter of 2013, up 11% from an average $5,111 in the first quarter of 2013 and up more than 20% from $4,705 per acre in the second quarter of 2012. Ranch and pastureland prices were also slightly higher in the second quarter of 2013, with District lenders reporting average prices of $2,372 per acre, up about 4% from $2,274 per acre in the first quarter 2013 and up close to 1% from $2,349 per acre the previous year. Looking ahead to the third quarter, lenders reported that they expect land values to rise relative to last year. “A proportionately larger number of respondents expect quality farmland and ranch or pastureland values to increase in the third quarter relative to a year earlier,” the report said. Using variables based on diffusion index methodology, the average expectations index for quality farmland in the third quarter of 2013 was 127, while for ranch and pastureland prices, the index value was 108. (With diffusion index methodology based on survey responses, 101-200 indicates overall expectations of higher values, while 0-99 indicates expectations of decreasing values. A value of 100 indicates expectations remain the same.) Farm Income Average farm income and spending rose slightly in the second quarter of 2013 compared with a year ago. “On net, respondents indicated that second-quarter District farm income, along with capital and household spending, increased modestly relative to their respective levels one year ago,” the report said. Based on diffusion index methodology, survey results showed an actual income index level of 108 for the second quarter of 2013 across the District. Looking ahead at the third quarter, lenders indicated they expected lower farm income, with survey results showing a diffusion index value of 91. “Across the District, bankers expect farm income to fall over the course of the next quarter compared with the third quarter of 2012,” according to the report. Cash Rents Average cash rents per acre for quality Eighth District farmland during the second quarter of 2013 were higher than the first quarter 2013 and the second quarter of 2012. For the second quarter 2013, cash rents for quality farmland averaged $183 per acre, up 6.7% from an average $171 per acre in the first quarter 2013 and up 12.9% from an average $162 per acre the previous year. Meanwhile, lenders reported cash rents for ranch or pastureland of $57 per acre, down from the first quarter’s average of $64 per acre, but remaining above last year’s average of $53 per acre. Looking forward, lenders expect rents to increase in value for all land categories during the third quarter of 2013. The report also noted that “anecdotal information collected from other sources suggests some shift in cash rents toward a variable or profit-sharing basis,” might not be fully captured in current cash rent data. Ag Loan Demand And Repayments On average, lenders reported that while demand for agricultural credit across the District remained unchanged in the second quarter compared with a year ago, they expected loan demand to pick up in the third quarter. In addition, survey results showed more funds were available to prospective borrowers during the second quarter of 2013 than a year ago, and this should remain the case in the third quarter. Loan repayment rates also remained essentially the same compared with a year ago, and expected to remain unchanged in the third quarter. Average interest rates on most types of loans increased slightly from the first quarter of 2013, with rates on variable interest loans increasing more than fixed-rate loans. Continue reading
Future Of Forestry Is A Growing Problem
Forests can combine a working environment with places for recreation and nature. Picture: Jon Savage by STUART GOODALL Published on the 07 August 2013 FORESTRY is a Scottish success story, supporting almost 40,000 jobs and contributing nearly £1.7 billion to the economy every year. It is also a backdrop to Scotland’s tourism industry – many iconic Scottish landscapes and images feature forests, and tourists and locals alike enjoy walking, biking or viewing wildlife in these special areas. Our forests are unique in that they can combine a working environment with places for recreation and nature. Most are actively managed and produce wood to supply the materials for our everyday lives. Our ancestors used wood for shelter, fire and hunting. While we no longer need to hunt for food, we still build with wood, and use it for fuel. This sounds wonderful, and indeed Scotland’s forest industry has bucked the economic downturn with continued investment of around £50 million a year. Increased production and expanding exports have had an annual beneficial impact of £1bn on the UK’s balance of payments. But all is not green in the forest garden. The public image of forestry is stuck in the 20th century; think forestry, and many imagine dark, impenetrable blocks of trees where nothing lives. When trees are harvested, it’s assumed they will not be replaced. These misconceptions make it harder to achieve support for new woodland creation, especially those containing a proportion of trees grown to supply future stocks of wood. If we do not overcome this, we will damage rural employment, undermine carbon reduction targets and, ironically, undermine much of the wildlife that popular perception believes is damaged by forestry. The successful reintroduction of the sea eagle has seen these majestic birds set up home in forests managed to produce wood, alongside other birds of prey and the iconic red squirrel. Long-term Wood production and availability is at a modern-day peak due to high levels of historic planting, but forestry is long-term, with planning horizons stretching 15-25 years – and investment will only continue if Scottish businesses can guarantee a supply of wood. The problem is the stark fall in softwood planting (the mainstay of the forestry sector) since the early 1990s. In more than 20 years since 1991, only 41,000 hectares (ha) has been planted, compared to 215,000ha in 1981-90 alone – an astonishing drop. Successive Scottish Governments have committed to 6,000ha of new softwood planting annually, which would provide the required confidence in future supply. Scotland is also losing large swathes of softwood forestry to windfarms, conversion to other habitats, and changes to the make-up of existing productive forests to make them more diverse and attractive to wildlife. This cannot continue. Wood availability will peak around 2025-2030, then fall steeply. This is a long-term problem with short-term consequences; reduced confidence in future raw material supply will lead to a drop in investment, job losses and reduced economic growth. We have to plant far more trees in the next decade than we are doing now, to secure the future of a successful industry, vital also for our existing forests. If forests are not managed, they do become dark and impenetrable, and unwelcoming to wildlife and people. Businesses Scotland’s wood-using businesses generate the income to pay for management; if these businesses decline, so will our forests. There are people who want to plant trees and we need to ensure Scotland’s regulatory and grants system for land allows them to do so, to achieve what all of Scotland needs – new, well-managed, multi-benefit forests that provide the wood we need for our everyday lives, while allowing people and wildlife to enjoy the woodland environment. The forestry sector is campaigning on this issue and had a productive meeting recently with forestry minister Paul Wheelhouse and enterprise minister Fergus Ewing, who recognised the significance of softwood forestry and reaffirmed the commitment to plant 10,000ha a year until 2022, with a 60:40 split in favour of productive softwoods. The ministers also delivered a clear message to the sector to keep planting, stressing that the latest reform to the Common Agricultural Policy should not lead to unnecessary and potentially damaging delays. There was also support from Mr Wheelhouse and Mr Ewing for ensuring that grants do not dissuade landowners from planting productive softwoods. This is encouraging, but it is important that it leads to real action; the future of a sector that can do great things for Scotland depends upon it. • Stuart Goodall is chief executive of Confor: promoting forestry and wood (www.confor.org.uk) More information on becoming Continue reading
