David Lawson – Estates Gazette 2003
But first impressions can lie. Roscrow is actually a property evangelist, fighting the prejudices of fellow financial advisers which have kept small investors out of bricks and mortar. Perhaps the balance was subconsciously tipped by his first job. As a trainee accountant at KPMG, he had to tally up cash from the collection plate of a local church where the senior partner was honorary treasurer.
But it took a new life half a world away before he made the breakthrough,
after moving from his native
It won’t be easy. Roscrow’s latest campaigns involve injecting commercial property into ISAs and persuading the government to allow residential property into small pension schemes, and both are proving hard going. Under pressure from independent financial advisers to create a tax-efficient savings scheme involving commercial property, he was optimistic about raising £30m for Close’s High Income Properties Fund. When subscriptions closed before Christmas, only £20m had been pledged and the qualification period has been extended to March.
Roscrow still expects to hit the target and then gear up to spend as much as £100m. But he is visibly disappointed about not making the cut first time around. After all, it was the clients who had come knocking on his door.
‘They saw how well the sector was doing compared with equities,’ he says. That door had long been prised open with a series of tax-efficient open-ended funds and closed-end limited partnerships, but finding a formula to meet ISA rules was more difficult. The main problem is that schemes must be listed, which adds expense and cuts returns.
Scottish Widows found a loophole by setting up offshore and listing in
It took a year of hard work to come up with a comparable scheme, which makes the lukewarm reception all the more galling. Roscrow blames scare stories in the national media about commercial property. ‘The whole sector has been tarred because of problem areas like the City,’ he says.
Yet the ISA fund deliberately steered as far away as possible from this troubled area, choosing to concentrate almost entirely on provincial industry. But surely choosing such an unglamorous sector would itself prove unattractive? Roscrow will have none of this.
Investors want good returns and industrial offers this promise. The new fund will offer 7.75% returns from day one and he is confident of hitting a total return target of 10%. ‘Industry is attractive because there is less pressure from big institutions, it yields high returns and has not had the massive growth in other sectors that could lead to a looming correction. The sector has already suffered its downturn and rents have grown every year bar one in the last decade.’
He admits it requires more intensive management and has appointed specialists Robert Mandeville and Gwynne[CORRECT] Furlong for that task but points out that IPD shows more than 80% of tenants renew leases every year.
Roscrow is confident enough to have already bought £32m of property – although
£18m of that is subject to a successful listing. Nor is he going for ‘safe’
bets. Most of the portfolio is in the
So why have so few others followed this path? A clutch of similar projects are still stuck on drawing boards. Roscrow points out the difficulties of creating products that are simple enough for the man in the street to understand, viable enough to overcome high start-up costs imposed by the ‘ridiculous’ listing provision and robust enough to dispel recent scepticism over commercial property.
But he is not going to give up. After lying dormant for so many years, property is now in his blood. It is a curious coincidence that another Australian, the late Dick Dusseldorp, who founded Lend Lease, pioneered attempts to attract pension funds into property a decade ago by suggesting tax-transparent vehicles. He crashed against the barrier of Treasury intransigence. Roscrow is undeterred about trying to do the same job for small investors.
He has other strings to his bow, including a range of open-ended trusts covering areas like ground rents and residential development, which are based offshore to give tax transparency. These are not listed so they don’t qualify for ISA status but do offer an alternative to IFAs, as the units can be traded all-year rather than scrambling for one-off equity issues.
They have also been given access to residential property. Close is a leading source for housebuilding finance but also has more eclectic fingers in this pie. One fund, for instance, has 250 retirement flats; another invests in ground rents. Now it want to offer a vehicle for rented homes.
Buy-to-let has taken small investors into dangerous and risky territory, according to Roscrow. He is spearheading a British Property Federation campaign to allow these into small pension funds. ‘It is plainly unjust that large pension funds can hold residential when smaller investors are barred,’ he says.
Residential is perfect for personal investment as prices rise with incomes, which is the aim of every pension fund. Extra investment incentives would also increase supply of homes and sort out problems such as empty flats above shopping parades, he says.
Commercial property is not being forgotten. Close has brought together around
£200m in limited partnerships largely invested in office blocks and is looking
to double this figure. Roscrow is bucking another trend by targeting the
The City won’t get a look in for at least a year for well known reasons. Retail is also overshadowed, as Roscrow is convinced the government will impose short leases, although he has £50m lined up for retail warehousing.
He expects no problems raising funds for any of these areas because IFAs will see the advantages of good covenants linked to tax transparency. The final task is winning over the man in the street.
Co-founder, deputy-MD Close Bros Investment Ltd [CBIL]
Educated: BSc Econ University of Melbourne 1986 [part-time]
Employment: From school to KPMG in Australia; 1988 to Chancery plc UK; 1991 co-founded CBIL – raised £350m of BES schemes; 1996 - set up Close Property Management [CPM]
A 200-year-old merchant bank transformed by a management buyout in the Seventies and listing in the Eighties into a niche player in areas ranging from aircraft to housebuilding finance. It has a market capitalisation of more than £1bn and property makes up about 15% of £3bn under management.
CPM Funds Under Management
Commercial property limited partnerships - eight properties 200
Enterprise zones trusts 37
Ground rents - 40000 properties 36
Residential development fund 60
Residential property - 250 retirement flats 19
Industrial property fund 32