First Residential Properties Plc (FRP) was incorporated in England on 5 September 2008 and, on completion of a round of fund raising is due to commence operations in Q2 2011. FRP has been structured so as to enable investors to acquire shares through their SIPPs or other pension vehicles and so enjoy the benefit of presently available tax reliefs. FRP is to act as a holding company. FRP will bear only limited costs on an annual basis; primarily non-executive fees, audit and tax compliance fees and costs associated with the routine shareholder matters (e.g. AGM costs).
The Directors of FRP will comprise David Fell as Chief Executive and two independent non-executives.
Property ownership and operations will all be undertaken by a wholly owned subsidiary company FRP Jersey Limited (FRPJ). FRPJ is a single prupose vehicle and was incoporated under the Companies (Jersey) Law 1991 on 29 December 2010. Use of FRP Jersey in this manner, whilst in no way reducing or sheltering the incidence of UK Corporation Tax on the Group’s activities does, under the present fiscal regime, mean that UK Capital Gains Tax will not be levied on the sale of property assets by FRPJ.
The Directors of FRPJ will comprise David Fell as a non-executive and two executive Jersey resident directors to be provided by Capita Fiduciary Group (CFG) in St Helier, Jersey. CFG is a subsidiary company of Capita Group Plc and is licensed and regulated by the Jersey Financial Services Commission. CFG enjoys an extensive and proven track record of providing directorial oversight services to property investment vehicles.
FRPJ will have no employees of its own. The sourcing and day-to-day management of tenants is to be sub-contracted to experienced, independent UK based tenant managers. These tenant managers will be remunerated as a fixed percentage of rentals collected. FRPJ will bear all direct costs associated with the property portfolio (e.g. acquisition costs, refurbishment and furnishing costs, insurances etc.).
All aspects of the Group’s day-to-day management of FRP are to be overseen / undertaken by Walbrook Property Management Limited (WPM), who will provide executive managent, office accommodation, bookkeeping and secretarial services. In return for services rendered WPM is to be remunerated with:
- A basic annual fee of 1% of the historic cost of the acquisition of property portfolio and payable monthly in arrears
- So as to allow for the fixed fee above being eroded over time due to inflation, an income performance fee amounting to 20% of EBITDA, adjusted to exclude the effect of property revaluations, in excess of a Hurdle Rate of a 2.33% annual return based upon the historic cost of the property portfolio.
- An exit realisation incentive equal to 20% of the capital uplift in value of the Group’s assets and is only payable on a exit.
The purpose of the exit incentive fee is to closely align the interests of WPM with those of FRP’s investors.
Walbrook will not make any handing or similar charges or mark-ups in relation to the purchase, refurbishment or sale of properties.