Weak pound should attract cash-rich overseas investors

Rugby Estates is to set up a new business division in order to tap into the appetite among cash-rich foreign investors for UK property.

Rugby Private Office will be a brokerage that aims to raise equity from sovereign wealth funds and overseas pension funds looking to invest in London and the UK.

Co-founders David Tye and Andrew Wilson are set to embark on an overseas funding drive, aiming to raise an initial £100m, with the possibility of raising more because of the large amount of equity held by foreign investors.

Some of the equity raised will be used to buy property directly for Rugby Capital, which invests using the company’s own balance sheet; and some will go into funds managed by Rugby Asset Management, the company’s third-party investment management arm.

‘We’re looking to provide a platform through which we can raise equity,’ Tye said. ‘We’re looking towards sovereign wealth funds in the likes of the Middle East, Far East, China and places like Norway, where there is money to invest from oil.

‘Each investor is different so we’ll go to people with a blank sheet of paper and provide whatever service suits their remit.

‘Initially we’re looking to raise a bit more than £100m, but these are very substantial organisations we’re talking about, so it might need to be more to make it worth their while.’

Tye said the long-term approach of these investors meant they would be attracted to take advantage during this period of volatility.

‘We’re putting this in place now because we think we’ll be at or near the bottom around this time next year. Overseas investors look at the weak pound, and the fact that London is becoming the financial centre of the world, and see it as a safe place to invest.’

The company posted a 1.5% drop in triple net asset value to 498p for the year to 31 January. Tye said this was because stakes held in listed businesses such as O Twelve Estates and Rugby Estates Investment Trust had to be written down in value.

The company said it would seek out more opportunities in 2008for its listed REIT, which buys privately owned property portfolios to cancel out latent Capital Gains Tax liability.

It will also try to revive its London Industrial Partnership, which was wound up last year. After severing ties with Bank of Scotland Corporate and Merrill Lynch International, it is looking for a new banking partner.