Returns from BES are heading downwards: Neasa MacErlean finds benefits in appealing to the conscience

RATES of return on business expansion schemes are predicted to fall substantially over the next few weeks.

'Investors have benefited greatly in recent months from the excess supply of student residences seeking funding before the beginning of term,' said Alan Hodgson, managing director of the sponsors Hodgson Martin.

'This excess supply is now absorbed, and I anticipate exit prices will fall sharply over the next few weeks, probably to around 110p.'

The new Hodgson scheme - a pounds 12m offering for the Oxford colleges St Hugh's, St Peter's and Wadham - offers an exit price of pounds 1.18 for each pounds 1 gross invested.

Even a pounds 1.18 return compares unfavourably with the pounds 1.26 exit price Peabody Trust was offering until the end of this week. Its pounds 21m House the Homeless scheme closed more than two weeks early.

Among new BES opportunities is the film Mad Dogs and Englishmen from Moor Street Films. The thriller, starring Serena Scott Thomas (she of the televised Diana, Her True Story), is expected to be released at about this time next year.

Although some of the film BESs have done well - notably Leon the Pig Farmer - these schemes are at the riskier end of the BES spectrum.

The demand for the House the Homeless issue proves the attractiveness of a good rate of return combined with an admirable cause. Several other BES schemes are also trying to hit the twin targets of conscience and purse.

The Chiltern Homes scheme, providing houses for the disabled and homeless, offers an exit price, guaranteed by Barclays Bank, of pounds 1.20.

Similarly, Neill Clerk's Unchained Reversions has been established to raise pounds 1.9m to help elderly people move into sheltered accommodation.

There is no contracted exit, but under this ingenious scheme investors could realise substantial gains depending on the performance of the property market.

The scheme will help more than 100 pensioners sell their homes and move into sheltered housing. They will buy the sheltered accommodation at a reduced rate negotiated by the sponsors.

The property will then be sold on to the BES scheme at a discount that secures the right of the pensioners to live there as tenants until they die.

At the end of the five-year BES period properties that have become vacant, to use a euphemism, will be sold.

The BES scheme will be liquidated but shareholders will get a liquidator's certificate to prove their interest in properties that still have tenants.

'The directors are reasonably certain that these certificates will have a market,' said a spokesman for Neill Clerk.

Certificate holders will earn rental income while the properties are inhabited and will receive lump sum payments when they are sold.

Shares in this scheme are being sold at 95p each, but Neill Clerk plans to raise the price to pounds 1 if there is sufficient demand for a second issue.

Investors who do not necessarily want their heartstrings plucked by their investments could look to Royal Bank of Scotland's pounds 20m Bessa RBS. The scheme will be used to buy repossessed properties from the bank and rent them out to the private sector.

Investors can chose between a fixed return of pounds 1.20 on each pounds 1 share or a FT-SE option that which will pay out pounds 2.50 on each pounds 1 net if the stock market grows by at least 36 per cent.

Details of schemes from the specialist BES advisers Allenbridge Group (071-409 1111) and BESt Investment (071-936 2037).

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