The RIO Property Group Ltd

Product Commencement - November 1997
Product Closure - January 2003

Overall performance - This fixed term investment ran for it's alloted 5 year period. Upon closure of this investment product all investors were remitted their original capital plus profits, in some cases the profit exceeded 57% of the original capital invested.

The RIO Property Group Ltd was incorporated in November 1997 to afford members the opportunity to gain exposure to the potential upside in the UK property market (potential which was underlined in the in-depth survey carried out in March of the same year). What followed was the identification of a parcel of select commercial investment properties which offered an attractive alternative to the normal low risk and low return paradigm.

In several reports issued during 1997/98 RIO underlined that stock markets around the world had been very volatile and that a host of investors had been seeking safe havens for their lump sum holdings. Getting in the property sector ahead of these investors offered potential for those who had already done their groundwork. As The RIO Club anticipated this volatility in the stock market before it arrived we had already incorporated The RIO Property Group Ltd with the primary purpose of taking advantage of the potential upside in the UK property market. Importantly, RIO was ahead of the mainstream investment market, which as history shows, would soon see what we had seen and taken advantage of; that there was an investment opportunity in the commercial sector of the property market.

During 1997 RIO’s Fund Manager (and the individual who had incorporated the RIO Property Group Ltd) had purposely been on site in the UK for several weeks and had successfully sourced what would later become a portfolio of commercial properties owned by RIO Property Group Ltd. All properties sourced and later acquired exceeded the requirements he had set for potential acquisition and would more than satisfy the requirements of RIO Club members.

The investment commenced in January 1998 and had a fixed maturity date of January 2003 when all those involved surrendered their share holding in RIO Property Group to enable us to close this investment.

Note- RIO Property Group Ltd the clubs first stand alone investment had matured and closed successfully.

The above investment was only available to club members, which set the stage for what became the standard requirements of any RIO offering. Looking back on this venture it was through the RIO Groups various sources that we were able to put together a remarkable selection of prime location properties. Our Fund Manager, William Gray, had previously invested in the UK property market and had produced profitable results in both the residential and the commercial sectors. As such he had the hands on experience required and has what can only be described as strong strategic contact base which helped make this venture profitable.

A shareholder in RIO Property Group Ltd would have benefited from the excellent investment portfolio created in 1998 as all commercial properties owned within the portfolio were returning +12% per annum on rental income alone. This far exceeded the norm for the sector but better still was the fact that all leases were of excellent covenant strength. RIO tenants were either local UK Government offices or financial institutions with strong accounts and what had been built was a blue chip portfolio.

Since all participating properties were purchased with tenants already in situ, RIO tenants were in all cases legally bound by a full repairing and insuring lease, meaning that the costs of any and all renovation and refurbishment would be met by the tenants, further bolstering the Return on Investment.

As this investment was structured to be a low risk venture, all properties held within the portfolio were freehold and free of any liens (no mortgage facilities were used as the buildings were acquired with money raised from the sale to members of shares in The RIO Property Group Ltd).

In almost all cases those invested were more than impressed by the returns produced in the 5 year period. Participating members realised returns of over 50% on their original capital. The target was a simple return of 12% pa which, more importantly, was achieved in a time when equity markets suffered from what was historically a volatile period.

We will be relaunching The RIO Property Group Ltd in April 2013 and if considering investment members should note the following facts:

The level of protection afforded to a landlord of commercial property in Scotland is more than excellent. In fact, the lease contract between RIO and the tenants mirrors a Government bond in that it represents the right to collect income. Furthermore, with a full repairing and insuring lease in position within the complete portfolio of properties, the responsibility for repairs and maintenance is conferred on the tenants.

Indeed, the lease between RIO and the tenants in all cases incorporates the phrase "repair, renew and/or rebuild".  As there is no limiting factor during the term of the lease, this places the tenants under obligation to reinstate the property to a condition comparable to that at the start of the lease.  This is clearly a very attractive position for The RIO Property Group Ltd, which in turn reflects the investment opportunity.

Our vast experience means that in all leased property RIO reserves the right to insure the buildings, they are also entitled to recover the cost of insurance premiums from the tenants, another good inbuilt feature to have. Another important factor is that all buildings are insured on an “all-risks” basis with the added attraction of the provision for rental loss cover to assure the income stream. This means, if the tenant does not pay rental due for any reason, RIO can recover the unpaid amount from insurance, thus an extra level of protection is provided.

As before this is a Sterling based investment and as such members who currently hold US Dollars or Canadian Dollars could also benefit from a currency gain (at the time of writing,  Sterling is currently undervalued). The previous success of this type of investment provided RIO members in excess of what was anticipated and it also proved an excellent way to invest capital and avoid stock market volatility.

March 2013