MUSCAT | London Central Portfolio (LCP), a private equity fund focused exclusively on residential properties in central London, plans to mop up around 5 million pounds ($7.57 million) from investors in the Middle-East, South Africa, India and south-east Asia for its London Central Residential Recovery Fund, a top official said.

The fund is looking to raise 23 million pounds including 13 million pounds through debt and the balance from investors within the United Kingdom (UK), chief executive Naomi Heaton said. The debt would be raised at just a per cent higher than the existing base rate in the UK and would help it take a larger exposure to the prime asset class, she added.

The fund also hopes to mop up about half of the equity portion from personal pension money in the UK, the official, who was in Muscat recently, to scout for investors after touring Hong Kong and South Africa for the same, said.

The Channel Islands Stock Exchange listed fund is looking at an annualised return of 15 per cent on a compounded basis and hopes to double the investment in five years, she said.

“There is a sustained demand versus limited supply,” she said referring to the geographical mandate of the fund, where no new construction or fresh supplies of dwellings are allowed even as demand existed from across the world.

According to her, property prices in central London is about four times to that of the rest of the country and a lower entry price of the fund would give investors a chance to invest in such an asset class. “It gives a bigger spread at a lower price,” Heaton said.

She also said a weaker pound has made buying real estate in the UK more affordable. Since 2007, the pound has devalued by about a fifth against the currencies of the UK’s main trading partners. The pound’s slide has stretched the finances of many British owners while making British assets attractive for overseas buyers.

The official quoted figures which indicated property sales in central London had dipped in 2009 to 4,552 units from its high of 8,793 units in 2006 and attributed the fall to the global financial crisis which stifled demand even for prime properties.

However, LCP properties still had an occupancy rate of 97 per cent during the crisis due to the global appeal of its location, she said. The fund was targeting blue-chip companies and high net-worth individuals as potential tenants of its properties, Heaton said.

The returns to the investors would be given from the appreciation of the value of the real estate while the rental income would be used for maintenance and other management costs of the fund, she added. Thereafter, the management plans to launch another fund but with a slightly different mandate, Heaton said.