HOLLAND PARK INVESTMENT - 10% RETURN P.A.

Designer's Impression of the Property
funds raised

Investment Highlights

Forecast annual return 10% p.a. paid at the end of the term
Total amount being raised £6.4 million
Amount being raised in this tranche £5.23M
LTV at exit 59%
Estimated end date January 2020
ISA Eligible 
Product Debt - Deep Discounted Bonds
Legal charge Second Legal Charge

The expected total return is a forecast based on the estimated term and is not guaranteed.
 

Investment Summary

  • Property - A grand mid-19th century detached villa, set back from the road with its own gated private drive, in a renowned Holland Park street. The house benefits from a large west facing garden and wide glass floorplates which give it remarkable accommodation. The area is home to a wide range of celebrities and successful entrepreneurs who doubtlessly value the large gardens and private nature of the houses. This 13,500 sqft home features a grand reception room, wonderful family kitchen area and 5 ensuite bedrooms. The property is nearing the completion of an extensive re-development with the addition of a beautiful lower floor underneath the garden that will include a swimming pool, sauna, steam room, gym and lounge.
  • Your Investment - Your investment will be used to provide development finance that will be raised by CapitalRise investors over the next 6 months. This tranche is used to repay existing debt as well as funding current construction activities.
  • Structure - Investors will benefit from a second legal charge on the property. This sits behind the senior lender. In the event of a forced sale of the property the holder of the first legal charge would recover its investment first. The value of the property would have to be 41% less than the anticipated sale value before investor capital and accrued return becomes at risk. Investors will be issued with Deep Discounted Bonds with accrued return paid at the end of the term. Invest using the CapitalRise ISA for tax-free returns. Tax rules apply and may change.
  • Sales Price- Savills have provided an independent Red Book Valuation of £50 million upon completion of the re-development. The final valuation will be available prior to making your investment.
  • Exit Plan - Construction activities are scheduled to complete part way through the term of the loan. This provides a modest sales period towards the end of the term. There are a two possible exit plans for the repayment of your investment: 1) The developer sells the property after construction; 2) The developer refinances CapitalRise with a another loan once the property is complete.
  • Location - The property is located on one of the finest streets within prime central London. The area boasts a number of attractive, substantial and prestigious family houses. The property is one mile from the centre of Kensington which has first class shopping facilities, restaurants as well as excellent transport links.
  • Developer - The developer provides bespoke and high quality construction, joinery and maintenance services to private clients with prime residences primarily in London and the surrounding counties but occasionally further afield. They have a proven large track record of successful redevelopment projects.

Returns Calculator

Return- Forecast return of 10% p.a. paid at the end of the term

Investment amount

Return accrues

You Invest

Jan 2019
Jun 2019
Dec 2019

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.

The Plan

  • The Property is nearing the completion of an extensive redevelopment with the addition of new subterranian leisure facilities that consist of a pool and spa, gym, bowling alley and cinema. This addition has almost doubled the gross internal area of the property to just over 13,500 sqft. Construction is expected to be completed during the term of the investment. After this point the property will be placed on the market for sale. 
  • The borrower is using part of the loan to partially refinance an existing facility as well as to cover some of the costs required to complete the construction. 
  • The borrower is being provided with £4.9 million at the beginning of the loan term. A further £1.5 million will be provided throughout 2019. These later tranches will be launched on the CapitalRise platform and will be available for CapitalRise members to invest.
  • The developer of the property provides bespoke and high quality construction, joinery and maintenance services to private clients with prime residences primarily in London and the surrounding counties. They have an impressive portfolio of past projects.
  • There are a number two possible scenarios through which the borrower is able to repay the loan. The borrower could sell the property after construction completes or alternatively the borrower may refinance CapitalRise with another loan at the point of completion of the works. 
  • Your investment will be secured by a second legal charge on the property. This sits behind the senior lender. In the event of a forced sale of the property the holder of the first legal charge would recover its investment first.

Financials

FUNDING STRUCTURE - AT ENTRY

Borrower Equity £ 35m 100%
Value Current Value
% of Value
CapitalRise Investor £ 21.5m 61%
Senior Loan £ 16.5m 47%
This investment provides the first of a number of tranches of development finance.

FUNDING STRUCTURE - AT EXIT

Borrower Equity £ 50m 100%
Value Current Value
% of Value
CapitalRise Investor £ 29.5m 59%
Senior Loan £ 22.6m 45%
The sale or refinance of the property would have to be 41% less than the anticipated sale value for your invested capital to be at risk.

Investment Structure

  • A new subsidiary company of CapitalRise, CR Addison Limited, has been incorporated to issue bonds to investors. CR Addison 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 one of the other pre-funders is associated with us. The CR investors’ funds will be used to refinance the pre-funders.
  • Your investment is ring-fenced because CR Addison 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 Addison Limited.
  • The investment is structured as deep discounted bonds.  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 10% per annum, compounded annually.
  • CR Addison Limited is the beneficiary of a second legal charge. This sits behind the senior lender. In the event of a forced sale of the property the holder of the first legal charge would recover its investment first.
  • CR Addison 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 ISA. 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 Addison Limited has the benefit of a second legal charge against the property which means that in the event that the borrower 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. The senior loan is secured against the property with a first legal charge so in any forced sale of the property, the senior lender will recover any amounts due to it first.
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 borrower has contracted an experienced developer who has completed numerous similar projects. Your investment will continue to accrue returns during any delays up until a hard stop date of 12 months after the estimated term. Included within the estimated term of 12 months there is a period allowed for sales. If construction is delayed it can continue into this period meaning the borrower would need to refinance their loan for another such as a sales period loan.
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, which includes a 12 months buffer in the event a potential sale takes longer than anticipated.
Compensation Scheme – The Financial Services Compensation Scheme does not cover poor investment performance.

You cannot claim compensation if your investment does not perform as expected, unless it results from us or Gallium not discharging our obligations to you. The FSCS would cover amounts owed to our customers in the event of our insolvency, up to a maximum of £50,000 per customer.

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 41% in order for your capital and accrued return to be at risk.

Deal Room

Documents

Deal Summary

Investor Bond Deed

Security Trust Deed

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Capital at risk. Investment performance is not covered by the FSCS. See key risks. before investing.