SOUTH EATON PLACE, BELGRAVIA PHASE A - 9.5% RETURN P.A.

Exterior of the property and a previous project by the developer

Investment Highlights

Product Debt - Deep Discounted Bonds
Forecast annual return 9.5% p.a. paid at the end of the term
Total amount being raised £2.1 million
Amount being raised in phase A £0.94 million
LTV at exit 53.9%
Estimated term 12-14 months
IFISA Eligible 
Legal charge Second Legal Charge

CapitalRise, along with its funding partners, has already underwritten this phase of the loan. This ensures the borrower receives the loan when required ahead of collection of investor funds.

 

Investment Summary

  • OVERVIEW – This investment opportunity gives CapitalRise members access to fund the first phase of a development loan being used to redevelop a large family home in central Belgravia. The estimated investment term is 12-14 months and future investment phases will be launched to members throughout 2019.
  • PROPERTY – This six-storey, 5,200 sq ft stucco-fronted family home has six en-suite bedrooms and is currently going through an extensive, high specification refurbishment.
  • DEVELOPER – The borrower is working with Leconfield Property Group who are the developer on the project. Leconfield are specialists in Prime Central London developments having completed over 50 projects in the area.
  • PLAN – The borrower purchased the property in 2017 and was subsequently granted planning permission to change the internal layout of the property. The borrower plans to make this their primary London residence once redevelopment is complete.
  • YOUR INVESTMENT – Investors will benefit from a second legal charge on the property. This means CapitalRise investors will be repaid their investment and accrued returns after the senior lender. The sale or refinance value of the property would have to be 46% less than the anticipated market value upon completion of the refurbishment before investor capital and returns are put at risk.
  • SALES PRICE – Savills have provided an independent Red Book Valuation of £17 million upon completion of the refurbishment.
  • EXIT PLAN – To provide an exit for CapitalRise investors, the borrower intends to refinance their debt with a mortgage upon completion of the refurbishment. We have already seen indicative mortgage terms from a selection of UK banks and the investment term includes suitable time for the borrower to refinance.

Returns Calculator

Return- Forecast return of 9.5% p.a. paid at the end of the term

Investment amount

Return accrues

You Invest

Jul 2019
Dec 2019
Jun 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.

The Plan

  • The borrower is using the funds to refurbish the property they acquired in 2017.
  • The property lies in the centre of Belgravia just a stone's throw away from Sloane Square and Victoria.
  • Phase A of this development loan has already been provided to the borrower by CapitalRise. We always pre-fund loans before offering them to our members as investment opportunities.
  • The property is an impressive stucco-fronted terrace house providing over 5,200 sq. ft. of living space across 6 storeys.
  • The borrower is already part way through an extensive refurbishment. The completed property will include six en-suite bedrooms, extensive living space, a wine cellar and double garage.
  • The refurbishment is expected to complete within the first six months of the investment term leaving a suitable six to eight-month period for the borrower to refinance their debt with a mortgage.
  • CapitalRise has provided the borrower £0.94 million in this phase, to cover recently incurred costs. All construction costs are verified by an independently appointed project monitor and a further £1.15 million will be provided in phases over the coming months. This will subsequently be offered to CapitalRise members as investment opportunities. 
  • Savills have provided an independent ‘red book’ valuation of £17 million for the completed property.
  • The developer has an impressive track record of developing prime central London properties. More information is provided below.

The Developer

  • Leconfield are a specialist Prime Central London residential property development company.
  • They provide clients a full range of services including design, project management and construction.
  • They have completed over 50 projects in Belgravia, Knightsbridge, Mayfair and Chelsea and focus primarilarly on prestigious garden squares.



.

Location

  • The property is located next to Eaton Square, considered to be one of London's most prestigious prime locations.
  • Eaton Square gardens is a stunning, 6 acre private garden with its own tennis court exclusively for Eaton Square residents.
  • Within walking distance of Sloane Square station and shops on the King's Road.
  • Excellent selection of restaurants and bars nearby.
Nearest stations

Sloane Square (0.2 mi)

Financials

Funding structure - At entry

Borrower Equity £ 13m 100%
Value
% of Value
CapitalRise Bondholders £ 6.64m 51.05%
Senior Lender £ 5.7m 43.8%
When a CapitalRise member makes an investment they are providing a loan to a borrower and are issued bonds by a dedicated subsidiary property company (CR Belgravia SEP Ltd). The company is the beneficiary of a Second Legal Charge over the property.

Funding structure - At exit (14 months)

Borrower Equity £ 17m 100%
Value
% of Value
CapitalRise Bondholders £ 9.17m 53.92%
Senior Lender £ 6.72m 39.6%
The property value would need to fall by 46% or more in order for your capital and accrued return to be at risk.

Investment Structure

  • A new subsidiary company of CapitalRise, CR Belgravia SEP Limited, has been incorporated to issue bonds to investors. CR Belgravia SEP 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-funder is associated with us. The CR investors’ funds will be used to refinance the pre-funders.
  • Your investment is ring-fenced because CR Belgravia SEP Limited will not carry out any other commercial activity. The directors of this company will (through CapitalRise Finance Limited) administer and enforce the terms of the bonds issued by CR Belgravia SEP 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 9.5% per annum, compounded annually.
  • CR Belgravia SEP Limited is the beneficiary of a second legal charge. In any forced sale of the property, investors will recover their capital and accrued return, before the developer but after the senior lender.
  • CR Belgravia SEP 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 Belgravia SEP 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 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. Also, the property is nearing the completion of the refurbishment with no structural work remaining. Should there be a delay past the end of the estimated term range your investment will continue to accrue returns up until a hard stop date in June 2021.
Refinance Risk – The borrower will refinance their debt at the end of the term. They may not be able to do so. The borrower has provided us with terms from two banks indicating they will refinance the borrower’s debt with a private client mortgage upon completion of the refurbishment. If this takes longer than planned your investment has an underlying redemption period of 24 months that commenced in June 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 46% 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.