APRIL 2010 | www.opp.org.uk
PENSION SALES
Industry warned of ‘SIPP timebomb’
Agents and IFAs are being warned that SIPP property sales could be a “timebomb” for the industry if not watched carefully. Pension investment specialists are
cautioning that some overseas property available to purchase through a UK self- invested personal pension (SIPP) could create problems for investors in the future, particularly due to issues related to capital gains tax and mortgages. While investors are exempt from
paying UK tax on properties bought through a SIPP, they could still be liable for local taxes depending on which country they buy in. “This could negate any benefit of purchasing via the SIPP in the first place,” said Pam Prince of Pure Cyprus Invest, which is working on the first SIPP-compliant property in Cyprus.
Delayed reaction
“It will take two to three years until completion for most of the off-plan product that’s been sold, and buyers won’t sell for a few years, so a seven to ten year time-bomb seems a long way
FUNDS
UK pensions to target foreign property
Pension funds targeting foreign property are expected to be the main drivers behind a substantial increase in UK institutional investment in non- listed real estate. Institutions will up their stake in
the market by 20% to £29 billion over the next three years, according to a survey by the European Association for Investors in Non-listed Real Estate, INREV. Over a third of institutional funds questioned already have non- listed exposure to residential and/or
leisure real estate. “Pension funds’ exposure to real
estate is currently below targets,” said INREV’s director of research, Lonneke Löwik. “Now they are expected to grow to their strategic allocation targets and non-domestic, and therefore non-listed, is likely to be one of the significant beneficiaries of this.” The INREV UK Investor Universe
report, conducted in conjunction with the UK’s Investment Property Forum (IPF), shows that the £8 billion
Reload | Pension funds plan to up their non-listed property exposure by 20%
in non-listed real estate funds account for three-quarters of the total capital invested in foreign property by UK investors.
stephen.h@opp.org.uk | 19
NEWS IN BRIEF
Investors set sights on Europe
Careful planning | Retirement investors could face a foreign capital gains tax penalty
off. But it doesn’t matter how long it is because the IFA will still be responsible for their advice.” Off-plan property paid for with
a mortgage on the development’s completion represents another area that could create problems in the future if proper precautions aren’t taken. “If you’re going to rely on borrowing you have to be sure you’ll get it because if it falls through you’ve lost your whole investment,” said Michael Smith, head of technical at SIPP provider Pointon York. UK lenders in particular may be more
reluctant to lend on foreign property than domestic in the current economic climate, he said, although SIPP borrowing rules could work in buyers’ favour. “Banks may be more likely to lend to pension buyers because they must own two-thirds of the equity in the property outright. A lot of developers offering stage payments also have finance built in to the deal - it’s in their interests because they want people to be able to buy their product.”
Safe SIPP sales: pp54-55
Research from CB Richard Ellis shows that 60% of real estate investors have identified Europe as their primary target for investment in 2010. Speaking about the figures at this year’s MIPIM property exhibition in Cannes, CBRE’s head of EMEA research, Nick Axford, said as most of the investors surveyed were based in Europe, it was most noteworthy to see 40% of respondents identifying non-European destinations, with Asia as a clear target for many. The research also showed UK property continued to attract significant investor attention but that fears about liquidity led over a third of respondents to identify France and Germany as the most attractive markets. Investors see fewer opportunities in the distressed Spanish market, however.
Qatari Diar’s spending spree
National property investment fund Qatari Diar has sunk money into two foreign resorts in the last month. The fund has purchased a 50% stake in the MAIA Luxury Resort and Spa in Mahé, Seychelles, and has also acquired the rights to Motenegrin hotel complex Blue Horizon for an estimated €24 million. The Seychelles acquisition brings the fund into partnership with African hospitality company Tsogo Sun Holdings. Launched in 2004, Qatari Diar is wholly-owned by the Qatar Investment Authority sovereign wealth fund and has more than 35 real estate development projects active in more than 20 countries around the world.
New fund to target GCC
UK financial services firm Matrix has created a new company for the purposes of making long-term investments in GCC property. Matrix Property Middle East LLP has formed a joint venture agreement with ME Alignment, a Qatar-based real estate development and investment company, to set up a property fund management company in Qatar. Matrix Property ME will focus on income-generating projects in the industrial, residential and office sectors, as well as development projects, located particularly in Qatar, Saudi Arabia and UAE, seen as the major growth markets of the GCC.
$190M FUND FOR ASIA
Asian investment firm SC Management has closed its
Real Estate Capital Asia Partners II fund with a total of $190.3 million. It had originally intended to raise more than twice that amount but said the fundraising climate had been “tough”. It has already invested in an off-plan residential property in Singapore and a distressed sale in Hong Kong.
SWISS FUNDS MOST ACTIVE
Swiss pension funds tend to have the highest
allocation to the real estate sector of any institutional investors in Europe, according to new research. IPE Real Estate’s Top 100 institutional real estate investors report showed Swiss investors often invest more than 25% of their funds in real estate, compared to a European average of 9%.
CHINA FUND RAISES $200M
Hong Kong-based private equity real estate firm Gaw
Capital Partners has raised around $200 million for its third China-focused real estate fund. The vehicle will target residential and retail sectors across China’s second and third tier cities. A seven-year fund, it hopes to see returns of more than 20% with a loan- to-value debt ratio of less than 50%.
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