19
This alternative investment register aims to give the reader an
idea of the investments currently available in the market and
also those investments that have recently been fully subscribed.
INVESTMENTREGISTER
This includes all purpose built student
property investments including directly
held assets, collective investment schemes
and investments with a corporate
structure. The information was sourced
through internet based research.
This investment register is limited to
investments that were visible online, those
that are only marketed through closed
channels have therefore not been included.
This register provides a snapshot of the
industry at a point in time (Q2 2013) and
does not include historical information
on investments that are no longer being
marketed to UK investors.
The data gathering relied upon an
exchange of information, with providers
and promoters providing product literature
and responding to relevant questions.
The reliability of the responses and
accuracy of the literature received was not
verified, meaning the research is based
largely on the information provided.
DIRECTLY HELD
The investments included under “directly
held” purpose built student property offer
the investor the opportunity to purchase
leasehold or freehold property. These are
similar to buy-to-let residential property
that will be managed on the investors’
behalf by a property management
company, with returns coming from rental
income.
Directly held student accommodation is
not a pension (SIPP) compliant asset as it is
classed as residential property and is likely
to be targeted towards cash investors only.
These properties are openly marketed to UK
and international retail investors through
website, e-mail campaigns and telesales.
Direct purchases of property or land are not
specified investments and are not regulated
by the FCA, so these schemes may not be
captured by the new restrictions.
Student property should be considered
illiquid and there is not currently an
established secondary market.
CORPORATE ELEMENT
“Investments with a corporate element”
include investments into purpose built
student property which offer the investor
exposure to the market through debt
financing. The most common investment
structures for this include asset backed
bonds, loan notes or developer buy-back
agreements with fixed returns paid as
interest.
The Financial Conduct Authority’s (FCA’s)
policy statement PS13/3: ‘Restrictions on
the Distribution of Unregulated Collective
Investment Schemes (UCIS) and Close
Substitutes’ has restricted the sale of a
number of investments to retail investors
from 1st January 2014. Close substitutes
includes Qualified Investors Schemes (QIS)
and any investment that is not a direct
purchase of an asset, but instead has
a structure around it that modifies the
investors’ exposure to the asset with an
element of pooling, either income, profits or
contributions.
This policy statement was based upon
the Financial Services Authorities (FSAs)
consultation paper CP12/19 which was
released in August 2012.
The FCA deemed that these investments
are only suitable for high net worth (HNW)
(those with over £250,000 in investable
assets, so not including their primary
residence and those with an annual income
in excess of £100,000) and sophisticated
investors due to their high risk, illiquid
nature.
It is unclear what affect this will have on
the industry but this ruling will dramatically
narrow the audience regulated IFAs can
promote alternative investments to.
COLLECTIVE INVESTMENT
SCHEMES
Investments included under “collective
investment schemes” pool investors’ funds
in order to purchase purpose built student
property. The property will then be managed
by a management company and the investor
will receive returns on an annual basis
(from rental income), at the end of the fixed
investment term (from capital growth) or
through a combination of both.
This includes regulated investment
schemes and UCIS. A number of these
investments are located offshore in order
to benefit from greater flexibility and tax
efficiency than is achievable in the UK.
At present these types of schemes are open
to retail investors, although this will change
in 2014 based on the FCA policy paper
PS13/3.
PS 13/3 is likely to dramatically narrow the
audience collective property investment
schemes can be promoted to: they can
only be promoted by authorised advisers
with the correct permissions and they can
only be promoted to high net worth and
sophisticated individuals.
Some schemes may still claim that they are
not collectives but rather direct purchases
of property and these may escape the new
regulations. But as noted earlier in the
market outlook section, the consequences
of getting this wrong are serious. These
investments are likely to be high risk and
illiquid.
