Aug 25, 2020

Carrick Property Meets Investor Demand for Offshore Real Estate

In conversation with Asset, Craig Featherby, founder and CEO of the Carrick Group of Companies, and Bradd Bendall, Group Sales Director, said the launch of a global property division was timeous, considering South Africa’s ever more challenging investment environment. It met a clearly identified need to assist clients to future-proof their portfolios and their retirement planning.

“I am proudly South African and own properties in South Africa,” says Craig, “But when you’re rendering financial advice, the protection of capital and the gradual appreciation of that capital have to be at the forefront of the investment process. That responsibility is the driving force behind the introduction of Carrick Property to our Carrick Wealth clients and the broader investor market.”

For Bradd, the opportunity to broaden clients’ investment horizons and assist them to achieve secure offshore wealth creation through real estate is a compelling one. The addition of a new asset class to Carrick’s onshore investment options adds weight to its standing as a truly integrated wealth management company, he says, and provides it with a strong foundation on which to create diversified offshore investments for clients.

“By externalising wealth creation through property purchases in carefully selected international jurisdictions, Carrick clients are achieving peace of mind as regards the safety and the future health of their investments.

“Offshore property is outperforming other products on the market and producing really good returns.”

Carrick’s current real estate offerings are based in the UK, Germany and Portugal, and while they are not specifically citizenship-linked at this point, take-up has been extraordinarily good in spite of the pandemic landscape, according to Bradd. “Lockdown hasn’t hampered purchases. What’s at play here is clients’ confidence in future-proofing their retirement this way, and the reality that these assets perform really well.”

During 2019, Carrick Wealth, as an organ-isation, acknowledged that the bull run in world stock markets had been one of the longest ever at 12 ½ years. It had to correct at some point. The concern was: when would it correct and when it did, what would Carrick clients be comfortable investing in?

“As a traditional wealth management company largely focused on fixed-income and equity-based instruments, we were aware that our investors had done well over the period and had been very successful in the investments they had selected. Just as we played our part in helping them achieve good profits, we wanted to find a way to help them safeguard these profits,” Craig emphasises.

The answer came in the decision to launch Carrick Property.

“We believed international property was the best offering for our clients, as well as for prospective investors looking to put a portion of their money offshore. In spite of the oil price dropping, stock markets falling in 2019 and the impact of the current global pandemic, clients still want to find that safe place with good returns in which to place their money. Our offshore real estate portfolio meets that need and we’re experiencing massive demand for the properties on offer,” he says.

The company has forged strategic partner-ships with leading international property developers and specialists in the UK and Europe to help them select markets and properties which meet the investment profile of Carrick clients. IP Global, who has invested US$3 billion on behalf of clients into various property markets, is one such specialist who has proved invaluable in guiding Carrick in its choice of locations and developments. Global Residential is a property investment company that focuses on UK assets where strong value can be demonstrated, as well as strong yields.

The team has a wealth of knowledge in the global property market and is very proud to be delivering great product and a first class end-to-end service proposition globally, says Craig. SevenCapital, with a portfolio worth GBP2 billion, is another. They also provide an end-to-end service, managing the asset on behalf of clients who are located on another continent.

In selecting suitable properties, Carrick follows a robust process which is governed by its investment committee. The committee has to approve all markets, all developments and all transactions. Its approval is informed by five strategic considerations.

Firstly, the security and stability of the chosen asset is paramount. It must provide a good balance between capital protection and capital appreciation. Secondly, clients are looking for income generation, and Carrick advises a reliable, ongoing source of passive income in foreign or hard currency. Offshore property can provide that. Thirdly, the company looks at diversification in terms of clients’ asset spread and would approve real estate which complements their equity-based investments. Diversification in terms of geographics is important too, with Carrick recommending exposure to other country markets. Then, cities which are chosen must be dynamic, high-growth cities with high-growth economies. They must provide suitable tangible investments with capital appreciation potential.

The UK market is viewed as strong and stable presenting a huge opportunity for Carrick and its clients, with solid income prospects.

Over the past decade the UK government determined that the average supply levels were 160,000 homes per annum, while new statistics show 300,000 new homes are needed per annum to meet demand, Craig notes.

“We’ve selected cities in the north of England,” he explains. “Bracknell, Birmingham, Leeds, Liverpool, Manchester and Slough are cities which have phenomenal regeneration programmes, converting old shipyards and docklands into highly desirable mixed-use areas. The efficiency of public transport systems means that you can live in one part of the city and work in another. An entry level one-bedroomed unit starts at GBP120,000 and a penthouse can be purchased for GBP500,000.”

The UK is currently attracting the most interest from clients with interest in Germany and Portugal equally spread. All three countries have buoyant rental markets, a key feature for Carrick when deciding on developments. In Birmingham, for example, the real estate opportunity identified by the company is a 30-second walk from a huge hospital. A deal done between the NHS and the developer means that medical staff provide a steady stream of rental candidates.

The city of Berlin was an easy choice with its low unemployment rate of 3.1% whilst the European average is 6.1%. Further to the east Leipzig offers an ideal entry point of GBP200,000 in a finely restored 1900’s building. Although rental yields are historically low in Germany, fixed mortgages from ten years upward can be secured at 2.2%, guaranteeing positive cash flow from day one, and capital appreciation in terms of leverage yield of about 15%.

Porto in Portugal is a popular purchase point. It’s a beautiful city, and having got through Covid-19 fairly well, Portugal’s growth rate is looking up. The country also offers the golden visa option which some clients want. While this quintessentially Mediterranean country is fundamentally very different to the UK and Germany, it adds interest to a small yet very appealing product offering.

“We don’t want to dilute the product offering too much,” Craig cautions. “It creates confusion. We are very protective of our clients’ assets and want to be sure that they do what we promised they will do.”

Bradd believes that the affordability of their offshore real estate opportunity is one of its most marketable components, as is securing guaranteed rental. To be in a market where you can borrow money close to 0% is completely foreign to South Africans, but once they consider it they can see the how well the cash flow can work in their favour.

“Investing in the UK property market or in the largest economy in Europe – Germany – through brick-and-mortar assets makes solid financial sense. In many cases it was a bridge too far.

Carrick’s offering now makes it absolutely viable for many people. It’s a unique investment opportunity.”

Craig explains that prospective clients can engage with Carrick either on a transaction- only basis or, as most people prefer, discuss the offshore real estate option as part of a holistic, integrated financial planning model.

“We want to make sure we give the right advice, and the right advice is providing a diversified portfolio of assets in which the property component complements the fixed interest and equity-based investments. In this case we need to establish where the client is today, where they want to be tomorrow and what the best way is of achieving this. We also need to carefully ascertain their attitude to risk.”

Whichever route a purchaser decides to follow, the process takes approximately 30 days from date of application to date of exchange, with the final finishing date 18 to 24 months after execution. It’s an expertly-managed process with Carrick and its internationally-based partners doing all they can to make it as seamless and stress-free as possible, says Craig in conclusion.

‘It’s a really safe asset class to invest in backed by our choice of reputable advisers and develop-ers on the ground. It delivers an exciting and lucrative property opportunity to clients looking to future-proof the money they have worked hard for.” A+

Interviewed by Tony Korsten
Written by Ana Lorton

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