- Fund net asset value has reached £57 million
- Fund continues to exceed its target with a 2.01% income return and 0.30% capital growth for its half year to 30 September 2016
- Fund acquires Etrop Grange Hotel to add to its portfolio of long income properties
TIME Investments, the leading property investment firm, has seen the TIME:Commercial Freehold fund’s assets under management increase by 14% since the Brexit referendum, from £50 million to £57 million, bucking the trend across the rest of the commercial property fund sector.
The TIME:Commercial Freehold fund, which was recently commended by Investment Life & Pensions Moneyfacts Awards 2016 for the Innovation Award, provides a secure and stable investment return, primarily through acquiring Long Income Property, commercial freehold property which benefit from leases of over 20 years. The fund targets an annual income return of 4%, although has exceeded this for the past two years, delivering a total return of over 5%. TIME is pleased to announce the fund’s interim distribution for the six month period to 30 September 2016 of 2.01%, exceeding its target. During this time, investors have also benefited from 0.30% of capital growth and consistent monthly liquidity.
The fund has also acquired a new commercial freehold to add to its portfolio – Etrop Grange Hotel near Manchester airport, which has a 125 year ground rent lease with rent reviews linked to RPI. This brings the number of investments in long income properties in the UK to 37, with a total annual rental income of £2.6 million. The freehold portfolio has a weighted average lease length of around 100 years and over 95% of the current portfolio has rental uplifts with a form of inflation protection.
Nigel Ashfield, fund manager of TIME:Commercial Freehold comments: “Despite the volatility in the wider commercial property market, our fund continues to perform well, increasing assets under management and delivering strong, stable returns as well as consistent liquidity. We are also pleased to add another high quality commercial ground rent in the form of Etrop Grange as we continue to build scale and deliver against our defensive investment strategy using the security that long commercial leases provide.”
Historically, Long Income Property funds have been the preserve of large institutional investors such as defined benefit pension funds and insurance companies who prize highly secure cash flows. TIME Investments combined its skills in investing in long income ground rents and developing tax efficient products to deliver the first such commercial property fund available to financial advisers enabling their clients to access a new sector to help diversify their portfolios.
The main attractions of Long Income Property are as follows:
- The increased income security due to lease lengths normally being between 20 to 250 years versus lease lengths of typically under 10 years in standard commercial property funds,
- The strong income security leads to a lower level of volatility relative to traditional commercial property investments, and
- The level of inflation protection through inflation linked or fixed increase rent reviews compared to rental reviews of most shorter leases being linked to the open market value of the property which is far less certain.
As with all of TIME’s products, the fund is exclusively available through financial advisers as TIME does not take investments from investors direct. The fund is managed by Nigel Ashfield, Managing Director of TIME Investments, who runs a similar fund – TIME:Freehold, which invests in UK residential ground rents. This ground rent fund has a 23 year track record and more than £250 million in assets under management, and it has delivered a total return of over 5% pa since launch. TrustNet described TIME:Freehold as ‘The best risk-adjusted return record of any fund across the entire IMA unit trust and OEIC universe over five and ten years.’
Long Income Property is made up of two categories in commercial property: freeholds with ground rents and freeholds with long leases.
Commercial freeholds with ground rents benefit from very long leases (usually over 100 years) on land and buildings, where a rent is paid to the freeholder by a leaseholder, who may sublet the property to a tenant. Ground rents are typically increased on a regular basis, either with inflation linked or fixed rental increases, giving them in-built protection against inflation. The freeholder typically receives ground rents of between 10% and 30% of the full market rent and has full legal title on the property. Any failure to pay the ground rent means the full benefit of the property reverts to the freeholder. Given the value of the property can be several times that of the freehold, the investment is over collateralised and rental defaults unlikely.
Commercial freeholds with long leases are typically freehold properties let to tenants at market rent for periods of over 20 years. The security within these investments is primarily linked to the quality of the tenant, the property and the location. Commercial freeholds with long leases tend to offer a higher income return compared to ground rents. Compared to traditional commercial property investment with shorter leases, typically less than 10 years, they offer greater income security due to the longer length of lease and will generally have inflation-linked or fixed rental up-lifts rather than being linked to the open market value of the building. Furthermore, the leaseholder is responsible for maintaining the property so these costs do not affect the return to the freeholder.
Tax efficient structure
The Fund is structured as a Property Authorised Investment Fund (PAIF) – an Open Ended Investment Company (OIEC) specifically designed for FCA authorised property investments. The tax benefits of a PAIF are similar to those of a Real Estate Investment Trust (REIT), and are not subject to tax on capital gains within the fund. UK investors are taxed as if they invested directly in the underlying assets. The fund also benefits from NURS classification as an authorised fund, thereby offering enhanced investor protection.
The minimum investment for retail investors is £5,000. The fund has an annual management charge of 1%. Investors are able to access TIME:Commercial Freehold through ISAs, SIPPs, SSASs and offshore bonds via income or accumulation shares.
For further information on TIME Investments and the fund, please visit www.time-investments.com/cff.
IMF lifts global growth forecast for 2021, still sees ‘exceptional uncertainty’
By Andrea Shalal
WASHINGTON (Reuters) – The International Monetary Fund on Tuesday raised its forecast for global economic growth in 2021 and said the coronavirus-triggered downturn in 2020 would be nearly a full percentage point less severe than expected.
It said multiple vaccine approvals and the launch of vaccinations in some countries in December had boosted hopes of an eventual end to the pandemic that has now infected nearly 100 million people and claimed the lives of over 2.1 million globally.
But it warned that the world economy continued to face “exceptional uncertainty” and new waves of COVID-19 infections and variants posed risks, and global activity would remain well below pre-COVID projections made one year ago.
Close to 90 million people are likely to fall below the extreme poverty threshold during 2020-2021, with the pandemic wiping out progress made in reducing poverty over the past two decades. Large numbers of people remained unemployed and underemployed in many countries, including the United States.
In its latest World Economic Outlook, the IMF forecast a 2020 global contraction of 3.5%, an improvement of 0.9 percentage points from the 4.4% slump predicted in October, reflecting stronger-than-expected momentum in the second half of 2020.
It predicted global growth of 5.5% in 2021, an increase of 0.3 percentage points from the October forecast, citing expectations of a vaccine-powered uptick later in the year and added policy support in the United States, Japan and a few other large economies.
It said the U.S. economy – the largest in the world – was expected to grow by 5.1% in 2021, an upward revision of 2 percentage points attributed to carryover from strong momentum in the second half of 2020 and the benefit accruing from $900 billion in additional fiscal support approved in December.
The forecast would likely rise further if the U.S. Congress passes a $1.9 trillion relief package proposed by newly inaugurated President Joe Biden, economists say.
China’s economy is expected to expand by 8.1% in 2021 and 5.6% in 2022, compared with its October forecasts of 8.2% and 5.8%, respectively, while India’s economy is seen growing 11.5% in 2021, up 2.7 percentage points from the October forecast after a stronger-than-expected recovering in 2020.
The Fund said countries should continue to support their economies until activity normalized to limit persistent damage from the deep recession of the past year.
Low-income countries would need continued support through grants, low-interest loans and debt relief, and some countries may require debt restructuring, the IMF said.
(Reporting by Andrea Shalal; Editing by Shri Navaratnam)
Leon Black step downs as Apollo CEO after review of Epstein ties
By Mike Spector and Chibuike Oguh
NEW YORK (Reuters) – Leon Black said on Monday he would step down as chief executive at Apollo Global Management Inc, following an independent review of his ties to the late financier and convicted sex offender Jeffrey Epstein.
While Black, whose net worth is pegged by Forbes at $8.2 billion, will remain Apollo’s chairman, his decision to step down illustrates how doing business with Epstein weighed on the reputation of one of Wall Street’s most prominent investment firms. Black co-founded Apollo 31 years ago.
Apollo said it plans to change its corporate governance structure, doing away with shares with special voting rights that currently give Black and other co-founders effective control of the firm.
The independent review, conducted by law firm Dechert LLP, found Black was not involved in any way with Epstein’s criminal activities. Black paid Epstein $158 million for advice on tax and estate planning and related services between 2012 and 2017, according to the review.
Black, 69, said that although the review confirmed he did not engage in any wrongdoing, he “deeply” regretted his involvement with Epstein.
“I hope that the results of the review, and related enhancements … will reaffirm to you that Apollo is dedicated to the highest levels of transparency and governance,” Black wrote in a note to Apollo fund investors. He will step down as CEO no later than July 31.
Apollo co-founder Marc Rowan, 58, will take over as CEO.
Rowan has often kept a low-key profile compared with Apollo’s other co-founder, Joshua Harris, 56, and spearheaded many initiatives that turned Apollo into a credit investment giant, including the permanent capital base the firm enjoys through its ties to reinsurer Athene Holding Ltd.
The revelations of Black’s ties to Epstein took a toll on Apollo, which Black turned into one of the world’s largest private equity groups. Apollo executives had warned in October that some investors had paused their commitments to the buyout firm’s funds as they awaited the review’s findings.
Apollo shares are down 1% since the New York Times reported on Oct. 12 that Black paid at least $50 million to Epstein for advice and services, when most of his clients had deserted him.
Over the same period, shares of peers Blackstone Group Inc, KKR & Co Inc and Carlyle Group Inc are up 19%, 10% and 23%, respectively.
“We think a large number of (Apollo fund investors) took a ‘pause’, and we believe the outcome (of the review) and changes today will cause most of them to return to allocating to future Apollo funds,” Credit Suisse analysts wrote in a research note.
Apollo shares jumped 4% to $47.65 in after-hours trading on Monday.
“We continue to follow these events closely and will evaluate how Apollo addresses its issues,” the California State Teachers’ Retirement System, one of the largest U.S. public pension funds and an Apollo investor, said in a statement.
Epstein was found dead at age 66 in August 2019 in a Manhattan jail, while awaiting trial on sex trafficking charges for allegedly abusing dozens of underage girls in Manhattan and Florida from 2002 to 2005. New York City’s chief medical examiner ruled that the cause of death was suicide by hanging.
Black previously said he had paid millions of dollars to Epstein, but the exact size of his payments was revealed for the first time on Monday. Beyond the $158 million in payments, Black made two loans to Epstein totaling $30.5 million in early 2017.
Dechert said in its report that Black’s social ties with Epstein, who built his fortune by endearing himself to powerful figures in high society, went back to the mid-1990s.
Epstein won Black’s trust by resolving an estate tax issue for him in 2012 potentially worth at least $500 million, the report said. He ended up advising Black on various aspects of his personal financial affairs, from his family office and airplane to his yacht and artwork.
Black believed that Epstein provided advice over the years that conferred between $1 billion and $2 billion in value to him, according to the Dechert report. Black said in his note to investors that he had paid Epstein a fee equivalent to 5% of the value he generated on an after-tax basis, and not tied to hourly rates.
Black and Epstein’s relationship deteriorated after Epstein failed to repay $20 million of the loans and Black refused to pay tens of millions of dollars in fees that Epstein demanded, according to the Dechert report.
They severed ties in October 2018, according to the report. Black knew Epstein had been convicted in Florida a decade earlier for soliciting prostitution from a minor, the Dechert report said, but there was no evidence suggesting Black had knowledge of the other alleged crimes before they were publicly reported in late 2018, culminating in Epstein’s July 2019 arrest.
On Monday, Black pledged $200 million toward “initiatives that seek to achieve gender equality and protect and empower women,” as well as helping survivors of domestic violence, sexual assault and human trafficking.
Apollo said it would pursue a “one share, one vote” corporate governance structure that would do away with shares with special voting rights. It said the move could qualify it for listing on the S&P Global indices.
Apollo also said it would seek to give its board more authority to oversee its business, eroding the power of its executive committee led by Black.
The board will be expanded to include four new independent directors, including Avid Partners founder Pamela Joyner and physician and scientist Siddhartha Mukherjee, Apollo said. Apollo co-Presidents Scott Kleinman and James Zelter will join the board and take on increased responsibility running day-to-day operations.
Apollo had about $433 billion in assets under management as of the end of September.
(Reporting by Mike Spector and Chibuike Oguh; Additional reporting by Lawrence Delevigne and Jessica DiNapoli in New York; Editing by Sonya Hepinstall, Leslie Adler and Kim Coghill)
EU sees no cliff-edge ending for COVID fiscal stimulus
BRUSSELS (Reuters) – European governments will not need to abruptly end fiscal support for their economies after the pandemic, top officials said on Monday, noting that any withdrawal of stimulus would be carried out gradually and only once the economy has recovered.
Euro zone public debt rose sharply during 2020 and is likely to exceed 100% of GDP this year as governments borrow to help individuals and businesses survive lockdowns.
The higher debt raises concern about how to deal with it down the road and when to start cutting it again, since the EU last year suspended its rules limiting budget deficits and debt, known as the Stability and Growth Pact (SGP).
EU finance ministers are to discuss when to reintroduce any borrowing limits in the second quarter of this year.
“I believe it important that finance ministers debate and reach a common understanding on the appropriate fiscal stance by the summer. This can then serve as guidance for the preparation of their draft budgetary plans for 2022,” the chairman of the euro zone’s group of finance ministers, Paschal Donohoe, said on Monday.
“To avoid any misunderstanding, let me stress that this is not about an imminent withdrawal of fiscal stimulus,” he told the economic committee of the European Parliament.
“We all agree that our immediate priority is to shield our citizens, in particular younger cohorts and those most exposed to the crisis. There must be no cliff-edges,” he said.
Joao Leao, the finance minister of Portugal which holds the rotating presidency of the EU and therefore sets the agenda for EU finance ministers’ work until June, was equally cautious.
“We should not withdraw stimulus too early. We need to make sure the suspension clause for the SGP remains in force at least until we return to pre-crisis economic figures,” he told the committee. “We need to make sure jobs are maintained as well as the production capacity of companies.”
He said first cash from the EU’s 750 billion euro post-COVID economic recovery programme should reach the economy in the first half of the year.
“Real funding should be getting to the economy before the summer or in early part of the summer,” he said.
(Reporting by Jan Strupczewski; Editing by Giles Elgood)
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