Fund in Focus: The L1 Capital U.K. Residential Property Fund

While Australian residential property investors might be used to negative gearing – when costs exceed rental income – the situation is very different elsewhere. In the U.K., gross rental yields of 6-7% p.a. in tier-1 cities are common, meaning investors get paid to hold the asset. The L1 Capital U.K. Residential Property Fund aims to capitalise on this and deliver clients a net return of at least 10% p.a., including a dividend yield of 6% p.a. (after fees and expenses, before tax).

Kee Gan believes the outlook for U.K. residential property (ex-London) offers a compelling opportunity. The combination of high rental yields, low borrowing costs and attractive long-term supply-demand dynamics makes for an attractive investment case.

Key points:

• Fund 1 has achieved 7.5% p.a. net distribution yield to investors
• Strong capital growth (+23%) despite Brexit uncertainty
• House price to income ratios typically between 2.5x up to 4x, compared to 11x for Sydney, and 9.5x for Melbourne
• Income growth has significantly outpaced house price growth since the GFC
• In May 2020, 96% of residential rents were collected, compared to 63% for retail rents and 90% for office rents
• Fund IV is now open to both retail and wholesale investors.

Watch the full fund presentation by clicking on the player below. 

Defensive income yield and capital growth

The L1 Capital U.K. Residential Property Fund invests in high-yielding residential assets that can deliver strong and growing income, along with significant capital appreciation. Click the 'CONTACT' button below to find out more.