Sun, 11/12/2011 - 18:11
Mayfair Capital founder and executive director Guy Brogden (pictured) says the property fund manager has been able to take advantage of the difficult economic climate by reducing overall portfolio gearing through making unleveraged property acquisitions with freshly-raised capital, which continues to flow in from investors including charities, institutions, pension funds, companies, high net worth private clients and family offices.
GFM: What is the history and background of your company, principals and funds?
GB: James Thornton and I started Mayfair Capital in 2002 after we saw the opportunity to establish a new and diverse range of property funds to suit private clients, charities and institutions looking for a higher quality of professionalism and client service.
This was shortly after the Financial Services and Markets Act 2000 had opened up the market, enabling more unauthorised funds to be launched, and during the same time that the Reit market was being created. James and I had both been partners in the international firm of Jones Lang Wootton (now Jones Lang LaSalle) and James had previously been head of fund management at Savills.
Mayfair Capital’s discretionary funds currently under management total GBP350m, but the firm has a broader business encompassing providing finance for residential development, investment in indirect property, joint ventures and other property-related activities currently totalling another GBP250m. The discretionary funds are the Property Income Trust For Charities (PITCH), MC Property Unit Trust (MCPUT), MC Income Plus Fund (MCIPF) and MC Property Growth Fund (MCPGF).
GFM: What is the structure of your funds?
GB: Each one is different but structured to suit the underlying investor base. All our funds are open-ended. PITCH is a UK-based exempt unauthorised unit trust, and is only eligible for UK-registered or exempt charities. Through this structure no stamp duty is payable on property acquisitions.
MCPUT is a Jersey-based unit trust and is established there to be tax-efficient given the underlying investor base. MCIPF is a UK exempt unauthorised unit trust open to UK registered pension funds. These three funds are all core/core plus in style and distribute income quarterly.
MCPGF is a Guernsey open-ended investment company open to a range of investors including pension funds, family offices, high net worth individuals and corporates. This is categorised as value added and is targeting capital growth.
GFM: Who are your main service providers?
GB: Moore Stephens (London), Cooper Parry (Nottingham) and BDO (Guernsey) are our auditors; Nabarro (London), Forsters (London), Brodies (Edinburgh) and Maclay Murray (London) are our lawyers; Smith & Williamson (London), Schroders (Jersey) and Intertrust (Guernsey) are our administrators; Royal Bank of Canada (London) is our corporate trustee.
GFM: What is your distribution strategy and targeted client base?
GB: We market funds to counterparties and certificated professional investors. Investors are drawn from a broad spectrum including charities, institutions, pension funds, companies and high net worth private clients and family offices. Broadly speaking, 75 per cent of our clients by value are institutional and 25 per cent are private investors.
GFM: What impact has the recent global financial crisis and economic downturn had on your business?
GB: We have been able to take advantage of the recent economic climate, first in reducing overall portfolio gearing by investing new money raised in making new property acquisitions without leverage. Secondly, we have been able to attract substantial new money as a consequence of growing our team and presenting our funds competitively.
GFM: What is the investment premise of your funds? What types of property do you invest in, and where?
GB: Three funds are core/core plus-orientated and therefore invest in well let property. Geographically, we invest all over the UK but in the past three years we have only invested outside the south-east England if the property is let on a lease with fixed or minimum rental increases.
We invest mainly in commercial property but in the past two years have sought out residential investments in central London especially for our value-added fund, the MC Property Growth Fund, which offer capital growth prospects.
GFM: How do you make investments for the funds?
GB: Mainly buying property ‘off-market’ or where properties are being sold openly by people known to us.
GFM: What is your approach to managing risk?
GB: At the fund level, each fund has a risk management approach relative to its investment objectives. Generally, we control our exposure to individual tenant covenant, income and asset size, but each fund has different drivers depending on whether the investment objective is income, capital growth, or a mixture of the two. At the riskier end, the focus is on the specific project and the returns achievable over a given time period. All the funds are diversified to avoid asset-specific risk.
GFM: How has your fund performed?
GB: The Property Income Trust for Charities returned 8.2 per cent for the 12 months to June 30. The MC Income Plus Fund was up 2.6 per cent, while the MC Property Growth Fund No. 2 rose 3.2 per cent over the same period.
PITCH was the top-performing fund in 2010 among specialist property funds for the charity sector and according to Investment Property Databank, and in the top five funds in the UK Pooled Balanced Property Fund Index.
GFM: Are you looking at any particularly attractive opportunities right now?
GB: We are looking at quite a number, in central London office, retail and residential property and in the south-east across all sectors. Outside the south-east we are looking for investments where we are not reliant on open market rental value growth for performance, i.e. buying properties that are let with rents indexed to RPI/CPI or that have fixed increases built into the lease contract. We are actively looking at joint ventures, indirect investments, Reits and other property-related opportunities.
GFM: What developments do you expect to see in the real estate sector in your target market over the year ahead, and in other political and economic areas that may impact it?
GB: We see a property market that continues to polarise between prime and secondary, a continuing focus on covenant strength and an approach of “sticking to what you know best”. Investment in any asset class becomes harder when the market tightens up, as it has over the past six months. The key is really to get under the skin of an opportunity and make the right decisions with first-hand knowledge of the property, tenant, specification and location.
GFM: How will these developments affect your firm and the performance of your funds?
GB: We need to continually appraise our existing portfolios and look to exit properties that we consider will underperform over the next few years, as well as to appraise new properties against a difficult economic background and look to take advantage of underpriced assets where there is a structural market change.
GFM: What differentiates you from other managers in your sector?
GB: We stand out through service level, professionalism and experience. Each of our fund managers has been involved with commercial property for over 30 years. Where we can, we co-invest in projects, properties or funds alongside our investors (except in the case of our charity fund, where we can’t in our because we don’t run a charity) all the time using our professional approach and due diligence to reduce any downside risk whilst correctly appraising the upside potential. We treat the money given to us by our investors, large and small, as precious and expect to lose our reputation if things were to go wrong.
GFM: How do you view the environment for fundraising over the coming 12 months?
GB: It will be difficult, but in our key target segments property is seen as fairly priced, and we are providing products that the investors are looking for, so we are continuing to raise new money.
GFM: How do you expect your business to be affected by current and proposed regulatory changes?
GB: We will be affected by the AIFM Directive, but not significantly. The US Dodd-Frank Act has influenced some of the investment plans of US pension funds looking to buy property overseas, and some UK and European investors into the US, but our core business is working with UK clients focused on UK property.
GFM: Are you considering any mergers or acquisitions in the foreseeable future?
GB: No, but you never know what is coming round the corner!
GFM: Do you have any firm plans for further product launches?
GB: Yes, for property in the London area and in one or two selected sectors.
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