Wednesday, September 26, 2007

Lewis Charles lists Romania Property Fund on AIM

The Financial Mirror
26/09/2007

Lewis Charles, the UK-based securities firm set up by the Cypriot duo Stavros Loizou and Andy Charalambous has scored a new success following the launch and listing of a new property fund specializing in Romania, following the successful operation of its Bulgarian property fund. Lewis Charles Romania Property Fund Ltd., which raised EUR 40 mln, is a closed ended fund investing in residential and commercial property primarily in and around Bucharest and other large Romanian cities.

Lewis Charles Securities CEO Stavros Loizou told the Financial Mirror that the Romania Property Fund, as well as the Sofia Fund launched earlier, offer investors easy access and exposure to exciting developments in the promising property markets of Romania and Bulgaria. In addition to raising EUR 40 mln for the Romania fund, Lewis Charles Securities had previously raised EUR 50 mln for its Sofia Fund. Both funds are listed on London’s AIM said Andy Charalambous, Vice CEO, Head of Institutional Sales.

The proceeds of transactions in the Property Portfolio and any rental income derived from such portfolio are usually reinvested into further investments by the funds. The Sofia Property Fund, also a closed-end fund incorporated in Guernsey, invests in the Bulgarian residential property market and, particularly, apartments and villas to be built in and around Sofia. The fund may also invest in the ski resorts near Sofia. Investment Director Mark Anderson added that the Sofia fund is residential only. The Romania fund may invest in residential and commercial projects and has two initial projects: one residential project in Bucharest and a retail project near Ploesti.

“We have no formal bias toward any particular type of project but at the moment would probably favour residential because of favourable supply vs. demand. Both funds may acquire land with a view to either developing it or holding it in the land bank.”

A fund offers four main advantages to investors over direct investment: diversification of exposure and consequent lowering of risk; liquidity, as it is usually quicker and easier to sell shares quoted on a reasonably liquid stock market than it is to sell land or buildings; it is generally cheaper to buy and sell quoted shares than to deal through estate agents as the latter charge high commission rates; owning shares is less of a hassle than having to maintain a property. Lewis Charles Sofia Property Fund (LCSS.LN) was last trading at GBP 100 in a 52-week range of GBP101.75-75.75 with a market cap of GBP 48.35 mln and a 32% one-year return and 15.94% year-to-date return according to Bloomberg data. Lewis Charles Romania Property Fund (LCSR.LN) was last trading at GBP 144.50 in a trading range of GBP 145.00-142.25 since it was launched and a market cap of GBP 28.29 mln, according to Bloomberg data.

Anderson states that AIM-listed funds have enough liquidity to allow potential investors to exit if they want to and much faster and at a lesser cost rather than an individual investment.

The Sofia Fund has a maximum life of seven years expiring on 2012. The manager intends to arrange the property portfolio so that it can be realised in an orderly way by the end of six years and liquidated. The life of the fund may be extended by another year at the discretion of the directors, on the advice of the manager, if it is necessary for an orderly realisation of the fund’s assets. The management fee is 2% per annum and the manager will also be paid a performance fee of 20% of any gains generated by the property portfolio in excess of a 7% p.a. compound hurdle rate, plus 5% of any gains in excess of a 23% p.a. compounded.

The Romania Fund will have a maximum life of seven years expiring in 2014. The manager intends to arrange the property portfolio so that it can be realised in an orderly way by the end of six years when it will be liquidated. The life of this fund may also be extended by up to a year if it is deemed necessary. The management fee is 2% per year and the manager will also be paid a performance fee of 20% of any gains generated by the property portfolio in excess of a 10% p.a. compound hurdle rate.

Both Funds are managed by Lewis Charles Securities Limited (www.lewischarles.com) which is a member of the London Stock Exchange and is authorised and regulated in the UK by the Financial Services Authority.

Lewis Charles has been established as a niche player in Europe, a fact underlined by the ethnic background of the founders. Stavros Loizou states that, “our roots very much tie us to Eastern Europe and we hope to build on corporate clients in this space as well as the introduction of further funds in the very near future.”

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