British Capital reopens fund with UK base now in place

British Capital, the investment company focused on UK property opportunities, is to reopen its fund after successfully establishing a deal-making track record in the British market.

Two modern, well-located commercial properties are already in the British Capital portfolio, with loans provided by a strong funding partner in Santander Bank, one of Europe’s largest financial institutions.

Last year’s offer to subscribe for shares in British Capital provided for a subsequent equity-raising period as the company was confident the window of property opportunity would remain open in 2010.

The reopening was announced today (Wednesday, July 28) by British Capital executive Gary Fisher at the BJM financial services group head office in Illovo, Johannesburg. British Capital is a joint-venture between BJM and Cornerstone Asset Management.

British Capital raised R100 million for the entry phase of its move into the UK property market.

Since then the company has bought the Salton distribution warehouse in Wolverhampton and the McBride factory and warehouse near Liverpool. Total acquisition value is £16,6 million, with 65% loan-to-value funding from Santander.

Location, tenant stature, rentals and the terms of current leases meet all British Capital projections.

Deal structure confirms the continuing opportunity in the UK property market at a time of historically low interest rates. Acquisitions offering a 7.2% yield were funded at 4.8% – ensuring strong cash flow.

British Capital, a closed-ended investment company incorporated in Guernsey and listed in Bermuda, was established to pursue acquisition opportunities like this.

The company seeks stable, growing income and inflation-positive capital growth by investing in property and listed UK property shares. A SARB-approved institutional asset swap allocation simultaneously enables South African-resident investors to achieve currency diversification over and above their offshore allowance.

British Capital targets office, industrial warehouse, logistics and other commercial properties, with the focus on strong tenant covenants and sustainable cash flows.

Gary Fisher noted: “The UK investment market is expected to remain soft into 2011, when economic fundamentals and occupier markets may recover sufficiently to support long-term growth.

“Furthermore, there is broad consensus that sterling will remain weak in the short term. The cost of borrowing is currently low, though rates may move higher in the medium term as the UK moves into an inflationary period.

“These factors are extremely positive for our current shareholders and offer exciting prospects to other South Africans who seek hard currency exposure and growth opportunities in a key asset class.”

British Capital’s BJM link ensured clients of the financial services group are well represented in British Capital’s investor base.

Mark Appleton, Chief Investment Officer at BJM Private Clients pointed out: “Clients have an opportunity to top up their investment now British Capital has two outstanding yield-earning properties in the portfolio with further expansion in prospect.

“British Capital has formed relationships with vendors and brokers while establishing a reputation for securing quality property assets at a time when the flow of bankable deals was problematic. Prospects in the next financial period look promising.”

The possibility of a second chance for diversification into the UK property market was deliberately built into the original British Capital prospectus. However, there is no provision for further extension. When the current offer for subscription expires at the end of September, the fund closes for good.