Business is picking up for our Aim Tip of the Year First Property Group (FPO), an Aim-traded real-estate fund manager. Last month it announced a new £12m partnership with a big investment consultant, which prefers to remain nameless, to turn old offices into blocks of flats. The consultant has pledged 95 per cent of the equity, while First Property will manage the fund in exchange for a 20 per cent profit cut (in addition to the profits earned on its 5 per cent stake).
The fund, which is due to expand to £40m "in the near future", will invest in obsolete offices that can be turned into housing. Following a government ruling that removed local councils' powers to veto such conversions for a three-year period, the developments will not be subject to the usual planning problems. Moreover, with office values down about 40 per cent on their 2007 levels in most regions, the strategy should generate an average profit on cost of about 30 per cent, says chief executive Ben Habib. "Help to Buy has pushed money at the buying end of the market, but there is not much development finance to support the supply end, so the margins are still large," he explains.
