High Performance Commercial Investment
The Situation
When we started working with David, his concern was that the growth of his investments would not give him the return he needed in order to retire when planned.
He had £50K invested in a National Savings Certificates, which were gaining interest of around 3.8% annually, in other words barely tracking inflation. He did not know what else to do with this lump sum, having ruled out the stock market as too risky, and wanting an alternative to his existing residential property investments.
Adam reviewed David’s future retirement date, and found that, as things currently stood, he would indeed find it difficult to achieve the financial independence he desired by the date he had planned.
As David’s Financial Advisor, it was up to Adam to find an alternative investment that would substantially out-perform the National Savings Certificates, but did not present a level of risk that David was uncomfortable with.
What Adam Did
One opportunity Adam uncovered was the Gold 9 Property LP and Unit Trust, a commercial investment whose principle asset is a large office building in central London.
David hadn’t considered commercial property as an asset class, but Adam was confident that due to its prime location and financially strong tenant, the property was a sound investment and could easily achieve the expected return of 10.9% pa. Adam made a recommendation to David that he invest his lump sum in the opportunity for an anticipated 6 year term, when it was expected the property would be sold.
The Outcome
In fact under 3 years later the valuation of the property was such that the recommendation was made to investors to sell in the summer of 2007, well ahead of the planned 6 year term of the investment.
The sale of the property was completed on 29th June 2007. David has seen a return of £216 for each £100 of capital invested, or an additional £58K to the original £50K he invested. Given the purchase date of the property, this represents an IRR of approx 29.8% pa. These figures compare to £186 per £100 that was originally indicated based on pre-sale predictions in March and the 10% interest David would have received from his National Savings account during the same timeframe.
As an additional bonus, individual investors in Gold 9 have benefitted from ‘business asset’ Taper Relief which will reduce their Capital Gains Tax from 40% to 10%. After taking into account his capital gains allowance David should be £58K better off with no tax penalties to pay – a slightly better return than his National Savings Certificates!
A total of £108K is now available for re-investment and David has already chosen to place £50K of that into the current Stirling Mortimer Cape Verde Property Fund.