Property crisis as BES ends: Price falls mean investors may lose out

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The Independent Online
Thousands of investors who put money into assured tenancy business expansion schemes five years ago will have lost at least a quarter of their original investment because of falling property prices.

Investors that bought schemes involving property in London and the South-east could be facing losses of up to two-thirds of their original investment - not including the tax relief of up to 40 per cent.

Over the next few months about 85 assured tenancy schemes with investments of pounds 317m will be coming to the end of their five-year minimum investment period.

Nick Percival, of BESt Investment, says that only about 10 per cent of issues are likely to be at or above their original offer price.

However, with building societies predicting house price inflation of 5 per cent this year, liquidation of the schemes could mean the assets are redeemed just as the market begins to pick up.

BES sponsors are canvassing investors to see if they want to stay invested in property and are looking at ways of continuing with the schemes.

The BES company Artesian has about 8,000 investors, who put a total of pounds 42m in assured tenancy schemes. It is considering a number of ways for shareholders to hold on.

Richard Breem, Artesian chairman, said: 'If we liquidated the companies now investors would only be getting 80p in the pounds 1 back.'

The first company to come up to the deadline is Artesian Estates. Mr Breem is considering a link with a publicly quoted property company, which will offer investors money for their BES shares.

Those that want to stay invested can hold on to their shares, while those that want to disinvest can get some money back.

Johnson Fry, which has about pounds 40m worth of schemes coming up this year, is also considering different ways of helping people to make the most of their investments.

Robert Lo, a Johnson Fry director, said: 'How we proceed is really a matter between the directors and the individual shareholders.'

Johnson Fry was looking at various ways of offering an exit, including floating the BES companies or linking with a publicly quoted company. The company had surveyed its investors and 'the majority wanted to stay invested'.

Sun Life has two BES schemes with pounds 20m coming up over the next few months. Michael Probin, BES manager, said that getting a full quote for the companies could prove expensive. 'It is something that we are looking at but our investors are not interested in accepting discounts.'

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