Belfry fund value falls to less than half

INVESTORS IN a geared UK property fund marketed by AIB have been told that their initial investment has more than halved, due to the downturn in the property market.

The firm behind the third of the Belfry series of property funds wrote to investors in August, informing them that the value of their initial investment had fallen by 57 per cent by the end of March 2011.

At an annual general meeting last month, investors learned that the value of the commercial property portfolio held by the fund had fallen further between March 2011 and March 2012.

The value of the investment property in Belfry Three as of March 31st, 2012, had fallen to £81.55 million, compared to £147.825 million in March 2010, representing a write-down of 45 per cent in two years.

The series of Belfry funds, which raised about £120 million from Irish investors and were managed by Cheval Properties, the firm controlled by businessman Tony Kilduff, invested in commercial properties outside central London and in English towns.

Investors were brought into the funds through AIB Private Banking, the bank’s wealth management business.

It is understood that a number of investors borrowed a significant percentage of the equity they invested.

While the first Belfry fund delivered a strong return for investors, the subsequent funds struggled as the property market began to falter.

Investors in Belfry Five, which included Minister for Enterprise Richard Bruton, learned earlier this year that the value of their investment had been wiped out.

Accounts for the third Belfry fund for the year to March 2011 show that £1.9 million in management fees were charged by Helix Property Advisors, formerly Cheval Property Advisors, to the fund between October 1st, 2009, and March 31st, 2011.

AIB receives between 40 and 48 per cent of that management fee for its role in “the provision of business, financial and banking advice during the acquisition process and ongoing management of the investment”, according to the accounts.

AIB declined to confirm whether the bank had received this proportion of fees, which would equate to between approximately £765,000 and £918,000.

Commenting on the performance of the Belfry Three fund, a spokeswoman for the bank said:

“In what has been a very difficult property market, the fund has continued to manage the properties – minimising vacancies, managing the existing tenants and looking for opportunities to add value for investors.”