Safe haven for tenancy investors

THOUSANDS of investors who risk losing money in their assured tenancy business expansion schemes because of falling property prices are being offered the chance to move their assets into a unit trust instead.

The offer, by Neill Clerk, a firm of BES specialists, comes as scores of assured tenancy schemes with investments of more than pounds 300m reach the end of their five-year minimum investment period.

Many of them invested in properties in London and the South-east. Their investors face losses of up to two-thirds on their investment, not including tax relief of up to 40 per cent, if they decide to exit from the schemes now.

Until now, the only option available to investors has been either to delay winding up the scheme or to convert it into a publicly quoted company.

The second route is the one chosen by one particular BES company, Artesian, which was recently floated. At present, shares in Artesian are worth only two-thirds of the company's net assets.

A spokesman at BESt Investment, specialist advisers, said: 'It has been a worrying time for many investors. Some BES managers want to keep the schemes going while investors want to exit. Other investors think the timing is wrong.

'There are things bubbling away in the background but this is the first launch of this sort that we know about.'

Neill Clerk's alternative is to offer to exchange units in its trust for assets in the BES on the basis of pounds 1 per unit for pounds 1 of the company's net assets.

For those who want to exit early from the trust, Neill Clerk is imposing a sliding scale of penalties during each of the first 12 months' quarters.

Investors can dispose of up to 50 per cent of their units after three months, paying a maximum charge of 7.5 per cent. This falls to 2.5 per cent after nine months.

If they want to exit completely from the unit trust after three months, a penalty of 20 per cent on the initial bid price is imposed.

Michael Chicken, a director at Neill Clarke, said: 'What we are saying is that anyone who stays with us for that additional year will gain benefits from those who leave at a discount.'

He added that the trust was not making any projections about future growth in the residential property sector.

'I expect that a new, motivated management, plus economies of scale in terms of charges should produce better returns than those currently achieved by some BES companies,' Mr Chicken said.