UK firm plans to raise US$150 million to woo Asian investors in Central London property market
London Central Portfolio (LCP), an investment company specialising in central London residential property, plans to raise US$150 million to ride on the rising buying interest from Asian and Chinese investors.
Naomi Heaton , chief executive of LCP said the latest round of five-year fund, London Central Apartments III (LCA III), will be used to buy 100 flats in Prime Central London.
The company launched closed end funds in 2008, 2010 and 2013 and currently owns a portfolio of 40 flats which had been rented out.
“The benefit for investors in the new fund is they can see what they are investing,” she said in Hong Kong where she kicked off her two-week road show in Asia that includes Singapore and Malaysia.
She expects the money to be raised from LCA III would enough to buy 100 one to two-bedroom flats in Central London.
The firm is focused on buying iconic buildings around Hyde Park, Parliament and Buckingham Palace where the scarcity of stock coupled with international demand underpins long term price growth.
Heaton said the LCA III is targeting to offer a 12 per cent return per annum to investors due to keen demand for small -sized apartments in core London areas.
“Our tenants are bankers, people working in law firms who coming to work in London for three years or students studying in the city,” she said.
Chinese students account for 15 per cent of its tenants in the last six months, she said.
Investment bank UBS has a different view though, saying London is at the greatest risk of a housing bubble as real estate there begins to look overvalued.
London residential prices have surged 40 per cent since early 2013 owing to demand from overseas buyers, attractive rental yields and population growth, according to the UBS global real estate bubble index which tracks 15 cities worldwide. The data was released last Thursday.
“Foreign demand and demand deriving from safe-haven seekers largely explain current valuations. Global geopolitical risk and the high property valuations in Asian cities have helped to propel London house prices to new heights,” said the report.
The report says the London housing market is in bubble-risk territory with a score of 1.88, followed by Hong Kong at 1.65, and Sydney with 1.39.
The Swiss bank advise “caution” while pointing to “the risk of a substantial price correction should the
fundamentals for real estate investment deteriorate.”
However, Heaton said the shortage of family housing for a burgeoning city should prevent any radical correction.
“Buyers in prime central London tend to be the globally high net worth, buying for investment, as a pied a terre, or as a base for their children whilst they study at any of London’s world class universities. It is a safe haven for capital and a place where the rule of law, combined with political and economic stability provide a hedge against continued turmoil in the Middle East, volatility in finance markets and reduced oil prices,’ she said.
Buyers in central London have traditionally used mortgage finance for tax efficiency and to maximise their return on investment, she said.
“Affordability is not an issue and will not be for some time to come. With over 13 million high net worths around the world and just 5,000 sales a year in London, it is the scarcity of stock and the constant global demand that underpins future price growth potential,” she said.
In C-Suite on P3, Heaton talks more about the firm’s latest strategy of expanding its leasing portfolio in London.