First World Hybrid Real Estate Plc   

First World Hybrid Real Estate Plc ("FWHRE" or the "Fund") is a real estate investment company that invests in a combination of direct real estate and listed real estate investment trusts ("REITs").

The objective of this Fund is to combine the benefits of direct and listed First World real estate to generate a reliable, predictable and growing income. With the majority of the return generated from the income yield, the investment outcome can be anticipated with a reasonable degree of certainty.

This reliable and predictable income is achieved by investing in a diversified portfolio of UK warehousing and regional offices where:

The properties are well located in the United Kingdom and are not of a specialised nature.
The tenants are large, multinational and/or listed companies with a top Dun and Bradstreet rating.
A long term lease is in place.
The tenant is responsible for all maintenance and insurance of each property.
The lease has upwards only reversions.
Growth in the net income will arise from any rental increase which are contained in the leases and upward rent adjustments in terms of the contractual lease reviews.
News Release

Preview three key properties in the portfolio

Direct Real Estate

UK commercial real estate, yielding approximately 5.8%
Weighted average remaining lease term more than 10 years
Each property is independently appraised bi-annually on a rolling basis, therefore less volatile pricing
structure

Listed REITs

UK listed REITs yielding approximately 3.6%
Priced on stock market, therefore readily traded and liquid
Diversified

Combine the Benefits of Direct and Listed First World Real Estate

Liquidity and Redemptions

The portfolio includes listed Real Estate Investment Trusts (REITs). These REITs are readily traded and sold on first world stock exchanges and hence provide reasonable liquidity for redemption requests. The cash and REITs provide liquidity, with cash managed to reasonable working capital levels to avoid unnecessary yield dilution.

FWHRE invests approximately 75% of its portfolio in direct real estate which can only be realised in the medium to long term. Whilst the Fund also invests in listed REIT's to provide a reasonable level of liquidity, in certain circumstances it may be appropriate to limit redemptions to ensure the interests of existing shareholders are protected at all times. Consequently, the Offering Document allows the manager to limit the weekly redemptions to a maximum of 5% of the Fund, and also allows for the suspension of all redemptions where, at the discretion of the manager, it is considered to be in the best interests of investors. For further information, please refer to the Offering Document.

Low Volatility

FWHRE property investment criteria should enhance the reliable and predictable nature of the income stream and because the direct real estate will be revalued twice annually on a rolling property basis, price volatility is likely to remain low.

Flexibility

Adjusting asset allocation to take advantage of the higher yields in either direct or listed real estate as listed prices move between premiums and discounts to net asset value, will enhance the investor's overall return.


Enhanced Yield Resulting in Enhanced Returns

Positive Leverage

A portion of the direct real estate is financed by debt resulting in positive leveraging due to the differential between the cost of financing (currently under 3%) and the yields offered by direct real estate. This enhances the yield of the portfolio. FWHRE limits debt to 50% of the cost of the direct real estate on acquisition. Including the listed REITs and cash, the leverage position is lower than 50% overall. FWHRE can manage the interest rate risk by potentially reducing the over debt ratio and/or taking out interest rate swaps to fix a portion of the interest charge, thereby enhancing the predictability of the income yield for investors.

High Income Return

Without any price appreciation, the investor may achieve a return of approximately 4.5% per annum as a result of the dividend yield (before fees). The quality of the real estate and the tenants will ensure this outcome can be anticipated with a reasonable degree of certainty.


Click on the play buttons below to view aerial footage of each property

Additional Features

Asset Swap

Where investors have reached their foreign investment allowance limit they can utilise Marriott's asset swap capacity to invest in FWHRE. This facility is also available to trusts and companies wishing to invest into FWHRE.

Probate

Death Bed Donation

Marriott recommends the use of either a death bed donation and/or a joint account. A death bed donation takes effect on the day preceding the death of the investor and is the legal mechanism for transferring ownership to surviving beneficiaries. As the investment is no longer owned by the original investor on the day of their death, the investment will not form part of an offshore estate for probate purposes.

From a South African tax perspective death bed donations are deemed to be dutiable property of the deceased estate* and therefore still attract estate duty. To avoid double taxation, however, they are excluded from donations tax**.
* in terms of Section 3(3)(b) of the South Africa Estate Duty Act    ** in terms of section 56(1) of the South African Income Tax Act

Joint Account Holders

An investor may elect to open a joint account with another investor. In the event of the death of one joint holder, the whole of the portfolio will automatically vest in the joint surviving holder or holders. If a joint account investor elects a death bed donation, the donation has precedence and the investor will be deemed to have donated their investment the day before their death. The investor's portion of the joint account will therefore be transferred to the listed beneficiaries effective the day before their death.

Joint accounts and death bed donations can be elected in the Investment Mandate. Investors are encouraged to seek independent tax advice suitable to their personal circumstances.

Tax

Tax Clearance:

SARS permits an annual foreign investment allowance of R10 million for individuals, and an annual discretionary allowance of R1 million per year. The latter does not require a tax clearance certificate.

If you have reached your individual limit for the year then you can make use of the Marriott asset swap capacity at no extra cost. Please contact the Communication Centre for more details.

Taxation of Income:

The income received from FWHRE is considered a foreign dividend by the South African Revenue Service and as such is taxed at a maximum 20%. This is in most cases significantly lower than the marginal rates an investor would have to pay on local real estate income.

Technical Information

Minimum Investment Amount
£25,000
Investment Options
Class A (Distributing), or Class B (Accumulating)
Marriott Initial Fee
0
Investment Management Fee

Costs are based on a sliding scale depending on investment size:
Class A – deducted quarterly from income.
Class B – deducted quarterly from capital.
Investment amount Total fee per annum, excluding VAT*
£25,000 – £49,999 0.75%
£50,000 – £99,999 0.70%
£100,000 – £249,999 0.65%
£250,000 – £499,999 0.60%
£500,000 – £999,999 0.55%
£1m – £1,999,999 0.50%
› £2m 0.45%
* For clients based outside of the EU the investment Management Fee does not attract Isle of Man VAT (20%).
Charges
  • Additional costs are deducted from the Fund's Net Asset Value (NAV) in respect of Fiduciary Custodian, Property Management, Audit and other services. Please see the Offering Document for more information.
  • There are no brokerage fees or duties in purchasing units in FWHRE.
Financial Advisor Initial Fee
Maximum 3% (excl RSA VAT). Payments processed twice a month. Deducted from consideration received.
Financial Advisor Annual Advisor Fee
Maximum 1% p.a. (excl RSA VAT). Paid quarterly in arrears. Deducted from income quarterly.
Class A – deducted quarterly from income.
Class B – deducted quarterly from capital.
Income Payments
Class A: Income reinvested or paid quarterly (Minimum payment of £400 applies.)
Class B: n/a
Client Reporting
  • Biannual Valuations (28 February & 31 August)
  • Consolidated tax voucher and interest certificate annually
Weekly Pricing and Trading
  • FWHRE is priced weekly, based on net asset value (as opposed to on a listed exchange).
  • Shares can be purchased and redeemed weekly.
  • Instructions for redemptions need to reach us five clear business days before the next pricing date, for processing on that price date.