Re-structuring – Conversion PAIF

Re-structuring – Property Fund – Property Authorised Investment Fund – PAIF 

North Star Corporate Finance (“NSCF”) successfully advised on the launch of the first residential property (ground rent) Property Authorised Investment Fund or “PAIF”, the Freehold Income Authorised Fund, which completed in April 2013.

In September 2011, NSCF was appointed as corporate finance adviser on behalf of Alpha Real Capital LLP, a co-investing international real estate funds manager focused on value-added investing in global real estate markets.

NSCF strategically reviewed an existing real estate fund, which invested in UK ground rents, which was structured as a Baker-trust unauthorised collective investment scheme. NSCF appointed legal and tax advisers to the advisory team to augment the experience and expertise of NSCF to evaluate options for restructuring the product, given the shifting regulatory landscape.

The output of this strategic review was recommendation to convert the existing unit trust to a PAIF. NSCF implemented all aspects of the transaction and Freehold Income Authorised Fund was successfully launched on 3 April 2013.

NSCF advised on all core aspects of the transformational transaction, including:

  • STRUCTURING | NSCF provided key input into the selection and detail of the final legal and tax structure and detailed terms, balancing best practice governance rigour and investor returns with the appropriate commercial terms for the fund management team.
  • COMMERCIALThe Fund, previously named The Freehold Income Trust, was established 20 years ago to provide a secure and stable investment primarily through acquiring UK freehold property ground rents which offer an attractive income stream and capital growth prospects. The Trust has an unbroken track record of positive returns, offering annual income returns of at least 4.25%. Protecting and enhancing this track record was paramount to the NSCF service provision and NSCF undertook detailed work including assessing investor returns and TER analysis.
  • OPERATIONAL | The fund has a complex holding and operating structure – NSCF advised on all corporate aspects and implemented necessary operating arrangements following conversion.
  • TAXATION | NSCF, together with the tax advisers, assessed the tax impacts of the revised structure on the fund and investors. NSCF has excellent in depth knowledge of PAIFs (and indeed most fund structures onshore and offshore).
  • LEGAL | NSCF advised on the Scheme of Arrangement for the reconstruction (embodied in a unitholder circular) together with negotiation of all service agreements.
  • REGULATORY | NSCF advised both the Manager and Fund on all aspects of the regulatory regime, overseeing variations in regulatory permissions for the Manager and the approvals of the fund by the Financial Conduct Authority.
  • PROJECT MANAGEMENT | Overall management and implementation. Enabled significant efficiencies in terms of timeline and restructuring costs whilst ensuring significant reduction in transaction risk and ensured deliverability targets.