Second Estates has launched a fund giving investors exposure to the UK holiday lettings market ready for the summer and open to further commitments and a target of up to £100m in assets.
The fund is for sophisticated investors, HNWIs and institutional investors with access to an alternative real estate asset class, offering a share in any rental income and increase in property values over time. It has a minimum investment amount of £10,000.
Alistair Malins, chief executive and founder of Second Estates, said: “We’re proud to be the first movers in this market, opening up an alternative property asset class to sophisticated investors.
“The UK holiday lettings sector is booming whilst other property sectors are in the doldrums, making it a sensible choice for investors.
“Our fund targets top performing properties in some of the UK’s most successful holiday destinations, providing a strong underlying investment thesis.”
Investors in the fund receive a fixed rate coupon of 6% p.a., as well as further potential returns from property price increases and cash flow generated by the business. The fund has a target return of 12-15% per annum, which includes quarterly payments of the coupon from year two onwards.
The UK holiday letting market is a high yielding alternative property class, which is so far untouched by institutional capital.
Holiday let properties can produce yields of more than 12%, significantly above traditional buy-to-let and student properties.
Tourism has boomed in the UK in recent years, with a weaker pound attracting an increasing number of overseas visitors and encouraging more British holidaymakers to take staycations.
Tourists in the UK are increasingly likely to stay in holiday lettings and the sector has a higher proportion of ABC1 customers than hotels and B&Bs.
The holiday lettings market is forecast to grow at a steady pace of 4.4% year-on-year between 2012 and 2022. In 2012, it was valued at £2.3bn and is projected to reach £3.5bn by 2022.
Clive Sykes, investor in Second Estates, said: “Whilst other areas in the UK property market have stalled recently, the holiday lettings sector has gone from strength to strength.
“The robustness of this market has made it a popular target for investment and Second Estates provides a cost effective and hassle-free way of gaining exposure to this fast-growing asset class.”
Second Estates uses established third party to suppliers to renovate and manage the properties to minimise costs and ensure the portfolio delivers a high net yield.
The properties are also furnished to a high standard to create a space that guests want to spend time in and return to.