With the UK real estate market showing signs of recovery, property firm Piccadilly & Co is launching a new Shariah compliant fund aimed at sophisticated investors seeking to tap into this potential capital gains opportunity.
Co-founders and directors Andre Henderson-Stewart and Bernard Bouverot told IFN Investor that interest is picking with the lowering of interest rates as “a lot of properties lost value and suffered because of Brexit, because of COVID-19 and because the inflation post-2021 led to higher interest rates”.
The firm already has a small property lined up in central London to be the initial offer with the GBP80 million (US$100.94 million) fund, which is due to be launched shortly – for Piccadilly recently obtained the Alternative Investment Fund Manager licence from the UK Financial Conduct Authority.
“We obtained the planning permission to convert this into a residential property. It’s a very good asset that we have in an attractive address next to the Google UK headquarters. We are going to get four years of income and also sell the residential units one by one.
“The bank financing is lined up ready and we only need to allocate GBP3 million (US$3.79 million) for this first building. Once the deal is done, the fund’s investors will get 7% returns annually compounded for the first five years. Piccadilly & Co will not make any profit for the fund until the investors make more than 35%.”
Describing this as a typical hurdle rate for property investment schemes, Andre said Piccadilly & Co will get a 1.5% annual fund management fee in the interim. The profit will be a performance fee split 20:80 (with Piccadilly & Co getting the lower amount) after the fifth year or if the property is fully sold any earlier.
This debut Islamic fund aims to expand Andre’s business portfolio – having previously focused on serving family offices out of Qatar and Switzerland, racking up mostly Shariah compliant real estate transactions valued at over GBP1.8 billion (US$2.27 billion) over the past two decades.
“Not everybody understands what Shariah actually means. A lot of people think that it will restrict your access to the market and financing from banks is going to be very expensive. I can show it is not so with this fund as with Piccadilly & Co we will find sufficient suitable assets and market priced Shariah financing both in the UK and EU.”
With a minimum GBP250,000 (US$315,437) minimum initial subscription to the UK Shariah fund, Andre expressed confidence the fund’s 50% net asset value target will be reached in due course and Piccadilly & Co will next launch a GBP200 million (US$252.35 million) conventional open-ended fund to focus on larger real estate projects.
“Our focus is mainly in the UK. We could consider Paris, maybe a second city in Lyon. The US and Germany, we wouldn’t consider as these are not markets we know sufficiently enough. Spain is attractive but it’s not a target market for the moment.”
