CHELSEA PHASE A - 8% RETURN P.A.

A completed property by the developer providing investors additional security
funds raised

Investment Highlights

Forecast annual return 8% p.a. paid at the end of the term
Total amount being raised £1.7 million
Amount being raised in Phase A £1.4 million
LTV at exit 62.2% (incl. additional security property value)
Estimated end date May-July 2020
ISA Eligible 
Product Debt - Deep Discounted Bonds
Security

First Legal Charge on the property being refurbished and a Second Legal Charge on the additional security property.

 

Investment Summary

  • OVERVIEW – This investment provides investors access to the first phase of development finance for a well-situated apartment in a prestigious mansion block in Chelsea.
  • PROPERTY – The apartment consists of two bedrooms and two reception rooms that are located on the first floor of the building. The borrower plans to refurbish the property to a high specification whilst also altering the layout to optimise on space. 
  • DEVELOPER – The developer has a wealth of experience with similar properties and projects. Their portfolio from the past 10 years boasts several prime central London homes all refurbished to a high specification and sold with an average profit of 21%.
  • PLAN – The developer recently acquired the property and plans to commence the refurbishment shortly. This will include enlarging the master bedroom and en-suite bathroom as well as converting the existing dining room into a third bedroom.
  • SECURITY – Investors will benefit from a first legal charge over the property. CapitalRise has also secured an additional second legal charge on a property owned by the developer that is also located in Chelsea. This has recently been refurbished and is on the market.
  • EXIT PLAN – The refurbishment of the property is scheduled to complete within 6 months from commencement of the works. This provides a sales period of 6 to 8 months. Any sale of the additional security property within the investment term would lead to a partial repayment of the loan.
  • VALUATION – Strutt and Parker has provided an independent red book valuation of £2.825m once the refurbishment of Property 1 has been completed. The current market value for the property is £1.9m.

Returns Calculator

Return- Forecast return of 8% p.a. paid at the end of the term

Investment amount

Return accrues

You Invest

May 2019
Nov 2019
May 2020

Total Return

On original Investment of

Note: These returns are an indication only and are not guaranteed. Your capital is at risk and you may not get back the money you invest.

INVESTMENT WEBINAR

 
Past performance is not a reliable indicator of future performance.

The Plan

  • The borrower used the funds from this phase to acquire a property in the heart of Chelsea ahead of the refurbishment.
  • As with all CapitalRise investments the borrower has been provided the loan before all investor funds are received through our pre-funding mechanism. This ensures the borrower was able to complete on the purchase.
  • The property is on the first floor of a prestigious mansion block and is currently in a tired condition. 
  • The developer plans to refurbish the property to a high specification whilst making some alterations to optimise the living space in the apartment.
  • The property currently comprises of two bedrooms but the developer is planning on converting the current dining room into a further bedroom and improving the use of space in the sizeable kitchen. 
  • The refurbishment is expected to complete within the first six months of the investment leaving a suitable six to eight month sales period towards the end of the investment.
  • The borrower will be provided an additional £0.3 million to cover the construction at a later phase. This will be available to CapitalRise investors over the next few months. All construction phases cover costs already incurred and are independently verified by a project monitor appointed by CapitalRise.
  • Strutt & Parker have provided an independent red book valuation of £2.825 million for the refurbished property.
  • The borrower has strong track record having successfully refurbished and sold a number of mansion block apartments and mews properties in Chelsea and Kensington. 

Financials

Funding Structure - At Entry

Developer Equity £ 2.23m 100%
Value Current Value
% of Value
Additional Security £ 1.78m 80%
CapitalRise Investors £ 1.44m 64.4%
Investors will benefit from additional security with a second legal charge on a further property also owned by the developer. We have valued this at £0.33 million when considering the outstanding senior loan amount.

Funding Structure - At Exit

Developer Equity £ 3.16m 100%
Value Current Value
% of Value
Additional Security £ 2.3m 72.9%
CapitalRise Investors £ 1.96m 62.2%
The combined value of the property and additional security would have to be more than 37.8% lower than the anticipated market value for your invested capital and accrued returns to be at risk.

Investment Structure

  • A new subsidiary company of CapitalRise, CR Chelsea DG Limited, has been incorporated to issue bonds to investors. CR Chelsea DG Limited has already sourced some finance from pre-funding investors in order to facilitate the property transaction. We, CapitalRise Finance Limited, are one of the pre-funders and the other pre-funders are associated with us. The CR investors’ funds will be used to refinance the pre-funders.
  • Your investment is ring-fenced because CR Chelsea DG Limited will not carry out any other commercial activity. The directors of this company will (through CapitalRise) administer and enforce the terms of the bonds issued by CR Chelsea DG Limited.
  • The investment is structured as deep discounted bonds. A deep-discounted bond (also zero coupon bond where no interest is paid or discount bond) is a bond bought at a price lower than its face value, with the face value repaid at the time of maturity. For more information see the FAQ section. The bonds will be issued at a discount to the nominal amount and (if sufficient proceeds are generated from the sale of the property) at the point of redemption of the bonds, investors will receive proceeds equal to the issue price of the bonds and a return equivalent to 8% per annum, compounded annually.
  • CR Chelsea DG Limited is the beneficiary of a first legal charge over the property. In the event of a forced sale of this property CapitalRise investors would recover its investment first. CR Chelsea DG Limited is also the beneficiary of a second legal charge over an additional property that is owned by the borrower. For the additional security property our charge sits behind the senior lender. No investor funds are being provided for the development of the property providing additional security but in the event of any potential sale the senior lender will be repaid first and then any remaining proceeds would go towards partially repaying CapitalRise investors.
  • CR Chelsea DG Limited is not required to withhold UK income tax on this investment and so returns will be paid gross. Income tax may be payable by investors on any return on the investments unless you invest via your CapitalRise IFISA. Investors should take their own tax advice from an appropriately qualified professional.

Risks

As with all investments you should carefully consider the key risks involved which include:

Risks How this applies to you
Capital and Income Risk – Your capital is at risk and the income is not guaranteed. CR Chelsea DG Limited has the benefit of a first legal charge against the property as well as a second legal charge against an additional property also owned by the borrower. This means that in the event that the developer cannot repay your capital and accrued return, the investors may be able to force the sale of the property. However, the outcome is uncertain and there is a risk that you may not recover the full amount due.
Investment Liquidity Risk – You need to be prepared to hold this investment for the full term. We do operate the CapitalRise Bulletin Board where you can post your investment for sale at its current value. This does not guarantee a sale. CapitalRise will charge a fee of 1.5% of the sale amount if a buyer is found. You can post your investment for sale from within your CapitalRise account.
Construction Risk- As with any developments project, there might be a delay in the construction phase The developer has a proven track record for the development of high specification homes and apartments. Most notably they have completed a number of homes similar to this project. Should there be a delay past the end of the estimated term your investment will continue to accrue returns for a further 10 months up until a hard stop date.
Sales Rates Risk – Sales rates may be slower than forecast and/or the properties may sell for less.

One potential exit for your investment is a sale of the property after construction. Your investment has an underlying redemption period of 24 months that commenced in May 2019. This period includes a 10 month buffer in the event a potential sale takes longer than anticipated. The buffer commences at the end of the estimated term. Any sale of the additional security property will firstly repay the senior lender and any remaining proceeds of the sale would result in a partial redemption of your investment.

Compensation Scheme – The Financial Services Compensation Scheme does not cover poor investment performance.

You cannot claim FSCS compensation if your investment does not perform as expected.

Market Risk - If the market for residential property in the local area deteriorates, it may not be possible to sell the property at the price currently projected and/or there could be delay in the sale. The property value would need to fall by 37.8% or more in order for your capital and accrued return to be at risk.

Deal Room

Documents

Investor Bond Deed

Security Trust Deed

Access Deal Room

Capital at risk. No FSCS protection. See key risks.