It is planned that two-thirds of the fund will comprise flats between £300,000 and £800,000 in areas such as Fulham and Battersea. The top slice will be prime central London homes of up to £5m in value. The closed-ended Guernsey fund has a lifespan of between five and nine years (depending on market conditions) and an ambitious gross target return of 14.5 per cent a year (the majority is expected to come from capital appreciation rather than rental yield). It will pay a 2 per cent annual dividend to investors, who must stump up a minimum £100,000.
The London buy-to-let market is a great place to be - if you can afford to get in. The rising property market means that last year the average UK amateur landlord enjoyed a 7.6 per cent annual return on their investment, according to figures released last week from LSL Property Services. In London, where property prices are now back to 2007 levels in some areas, performance has been even stronger, despite a cooling off in the corporate rental market.
CR Property Fund is not the first to target central London properties - we have previously written about uninspiring attempts by and the to bring products to market. However, British Land's involvement could give this fund real credibility - especially when one considers that up to 80 per cent of its investors are expected to hail from outside the UK.
The idea for the fund was spawned by CR Property Advisers partner Richard Crosthwaite, who has been buying London properties for the company's wealthy private clients for years. In the last year, he has been deluged with requests, and a fund seemed the obvious solution.
Investors from the Far East, Middle East and Russia are specifically being targeted, as the property returns on offer are boosted by the currency advantage. Tax havens in the Channel Islands, Geneva and Monaco complete the international property exhibition circuit.
Surprise has been expressed at British Land's involvement, but its residential property management arm already manages 3,100 properties, and chief executive Chris Grigg is understood to champion the resilience of this growing business area.
As ever, the biggest risk for investors is deploying cash into a . Prime central London property owners are only too aware that their best investment is the one they sleep in every night, and increased demand is causing prices to rocket.
"We would like to buy whole blocks of flats off-plan," says Mr Crosthwaite. "There are a lot of projects that can't obtain development finance from the banks that we might fund." Schemes containing 15 flats or less are the target, as affordable housing provision kicks in above this level.
As the fund expects to attract Middle Eastern investors, properties have to be Sharia compliant. This means blocks can't contain cinemas, off licences or bars - and, unbelievably, even swimming pools can pose a problem.
Despite the challenges, demand from overseas investors is sure to get this fund away. Considering the borrowing constraints and regulation weighing down on UK buy-to-let landlords, could a domestic focused fund also succeed?
"Investors in the UK should have the opportunity to invest in professional residential funds in order to gain exposure to different sectors of the residential market, just as they do in the US, Canada and Australia," agrees James Taylor, director of property management at British Land. "The diversified income, greater buying power and benefits of economies of scale of these residential funds should provide a viable alternative to buy-to-let, and become an area of growth in the future."
When the time comes to liquidate this fund's portfolio, who knows how far the government's drive to encourage institutional housing ownership may have progressed? If the Reit legislation is tweaked to include residential property by then, perhaps British Land itself might snap it up.
