Portfolios of freeholds – what’s the attraction ?

by evolvedlegal on May 9, 2012

  • Sumo

Vincent Tchenguiz, the UK property business giant has recently reported that he is ready to place his extensive portfolio of properties worth £3 billion on the UK property market. The properties are a part of the Tchenguiz Family Trust. The portfolio contains properties all over the UK, and constitutes one of the most extensive trusts of its kind in the UK.

Why freeholds ?

In the past 20 years many shrewd investors have bought up portfolios of freeholds, often of converted houses. The freehold interest only has a residual value if long leases have been granted, but can still generate an income from small ground rents and other costs and fees. Money can also be generated with lease extensions. Many freeholders who have sold off long leases when converting houses do not want the hassle associated with remaining freeholder, hence why so many have been available at relatively low cost for a business with the administrative resources and know how to manage such a portfolio.

The Tchenguiz portfolio

The property portfolio has been developed over two decades by Mr. Tchenguiz, and represents approximately 1 per cent of the UK’s property market, including houses and flats. However, last year, Mr. Tchenguiz reviewed the portfolio and assets within the Tchenguiz Family Trust as a whole and searched for advice from Lazard on the running of the trust, and more specifically, the property portfolio. The properties which he acquired over the years, on average have a lease of sixty years. However, the portfolio had raised debts of almost £2 billion, causing Mr. Tchenguiz to seek for his remedy.

The advice given by Lazard appears to have been conclusive, that Mr. Tchenguiz sell the portfolio of £3 billion. Selling this portfolio will allow buyers the opportunity to gain control of 250,000 properties all over the UK, including freeholds and leaseholds.

The freehold properties, of which forty per cent are in the south east of England and 15,000 in London alone, have been targeted at buyers with extensive wealth funds. However failing this approach, last week, the search was broadened and a number of meetings were held with investors in the UK. It is speculated that meetings have been held with pension and insurance funds, though exact buyers are yet to be revealed.

Mr. Tchenguiz has publicly stated that his portfolio would allow any buyer a good investment. It is thought that the buyer would profit from future benefits from a speculative UK property price rise. Benefits from this portfolio would include rentals from tenants, which are considered a secure investment in today’s economy. The leases in the portfolio are on average long leases of sixty years, this could yield a long term gain for any investor and a stable income for years to come.

Recently, Mr. Tchenguiz stated that he was looking to seek damages from the Serious Fraud Office. This is due to the Serious Fraud Office conducting an investigation of Mr. Tchenguiz for the past year after his dealings fell through with Kaupthing, an Icelandic bank. However, this inquiry did not last long as the SFO confirmed that information gained on claims about Mr. Tchenguiz was false allegations and the case was dropped just before Christmas. However, Mr. Tchenguiz has refused to comment on these previous allegations.

After spending over two decades building this extensive portfolio of approximately 250,000 properties nationwide, Mr. Tchenguiz is adamant an investor will appear who will gain the obvious long term, stable benefits of such a large portfolio. With these properties worth approximately £3 billion, Mr. Tchenguiz has been searching for a sovereign wealth fund, though he has recently widened his sights and has rumoured to have met with numerous other investors. Although he is currently seeking damages from the Serious Fraud Office, it appears Mr. Tchenguiz is ready to let go of his extensive portfolio, the largest one of its kind in the UK.



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