Brandeaux’s beleaguered student accommodation funds have seen their valuations cut more than 6 per cent by Savills to £1.11bn at the end of August from £1.19bn a year before.
This downward movement of £72m has had a negative effect to the tune of 8 per cent on the net asset value of the fund as a result of gearing.
According to an update, published in September, the valuation movement was the result of revisions to assumptions by independent portfolio valuer Savills and related specifically to three factors:
• that operating costs assumed for valuation of the underlying properties should be increased;
• an assumption that buyers’ costs should be based on a sale of property rather than property being sold within a corporate entity, which would save stamp duty; and
• the elimination of the ‘portfolio premium’, which was previously included by Brandeaux to reflect the “added value of the portfolio as an integrated business”.
Based on this latest property valuation and the net profit to the end of August, the fund share price has fallen to £2.92 per share, compared with the last published share price of £3.11.
The property valuation statement noted that the portfolio continued to perform well on an operational basis, with over 99.5 per cent of the 16,827 rooms rented for the 2014/2015 university year at core rental rates 3.3 per cent higher than for 2013/2014.
Summer net rental income for the year to 31 August was £5.4m, compared to £4.1m the previous year.
The fund’s directors said in the update they continue to actively focus on creating liquidity for investors wishing to redeem their investment, following the decision on 26 June not to proceed with an initial public offering.
Since then the fund has had discussions with “a significant number of credible parties who have expressed an interest in acquiring the property portfolio”, according to Brandeaux.
“In practice, the sale price achieved may be lower or higher than the valuation,” it added.
The student property investments began to be wound up in January, having originally been suspended last summer due to liquidity concerns, which Brandeaux blamed on the Financial Services Authority’s move in 2011 to ban the sale of unregulated funds to retail investors.
More than £1.1bn is invested in the sterling share classes of three funds - the Brandeaux Student Accommodation, Brandeux Dual Asset and the Ground Rent Portfolio Plus funds - which are all domiciled in the British Virgin Islands.
The £900m ground rent portfolio completed the sale of the remaining properties on 2 July and the directors have now made compulsory redemptions to shareholders, following the announcement of the intention to wind-up at the end of 2013.
At the end of August law firm Regulatory Legal said it had started making claims against advisers whose clients are invested in the Brandeaux range of student accommodation funds.
peter.walker@ft.com
