Key Risks

The following is a non-exhaustive list of risks associated with investing through CapitalRise.

General Investment Risks

How this applies to you

Capital risk

Your capital is at risk. You may lose all capital invested.

If the investment benefits from a second charge against the property, this means that in the event that the developer cannot repay capital we could force the sale of the property. Where there is no second charge, forcing a sale would be more difficult and we would first have to sue the developer for repayment through the courts. In either case, the process of recovery may take time and there is a risk that you would not recover the full amount due to you.

Income risk

Income is not guaranteed.

If the investment benefits from a second charge against the property, this means that in the event that the developer cannot pay income due we could force the sale of the property. Where there is no second charge, forcing a sale would be more difficult and we would first have to sue the developer for payment through the courts. In either case, the process of recovery may take time and there is a risk that you would not recover the full amount due to you.

If the development fails to complete on schedule the developer is obliged to continue to pay you interest until it completes. As the project will not generate income during the investment term the developer has budgeted for these interest payments within its business plan.

Investment liquidity risk

You need to be prepared to hold this investment for the full term.

If you want to exit early, this will be dependent on finding another investor to buy you out at a price you are happy with. We will try to find a buyer upon request, subject to a 3% success fee. However, there is no recognised market for the investments and no guarantee that a buyer will be found at all.

UK property market and the value of your security

The repayment of your investment relies on the sale value of the property. Any future downturn in the UK real estate selling prices or the rental returns could materially adversely affect the value of your security, the developer's motivation to complete a development, and the developer's ability to finance repayments due to you. As well as factors impacting on the UK real estate market generally, there may be specific factors relevant to the particular area in which the property is based, or the property itself, which mean that the property cannot be sold at a sufficient price to repay all of your investment, or at all.

The proportion of your investment and its ranking means that property prices would have to fall by the amount specified on the ‘Investment opportunity’ page for your capital to be at risk.

Past and future performance

Past performance does not imply that future trends will follow the same or similar patterns.

Forecasts, such as those contained in the Returns Calculator, may not be achieved. External factors which are not under our control may impact future performance.

Second charge ranks behind first charge

Where there is a second charge over the property, this ranks behind a first charge held by a bank. This means that the bank will have to be repaid in full before you (including repayment of its costs). The bank may also be able to object to the sale of the property. There may also be transactional charges which will reduce the value to the investor.

For you to lose your capital in the event of a forced sale, the value of the property would have to drop significantly. You should review the investment structure chart for the relevant property to understand how significant a drop would be required and whether you are comfortable with this level of risk.

Developer Risk

Developers could misuse the invested funds without our knowledge, thereby increasing the risk of default. Developers may also become unable to complete the scheduled work on time, or at all, for financial or other reasons.

CapitalRise undertakes due diligence checks on developers before allowing them on the platform, including an assessment of their track record. If a developer misuses the invested funds despite our checks, you benefit from security over the property, as described on the ‘Investment Opportunity’ page.

Money held pending investment

Your money will only earn a return from the point at which you are issued with an investment. If we hold your money as client money prior to investment, you will not earn interest on it during that time.

The frequency with which we will batch and send investor funds to the developer will be determined by them, and explained in the ‘Investment summary table’. We encourage them to allow us to process on a weekly basis so invested funds can start earning interest sooner.

No cancellation rights

You cannot cancel your investment once it has been paid over to the Company.

Some investment products contain cancellation rights. We will permit you to withdraw your money before it has been committed to an investment, but we do not offer cancellation rights once the money has been invested and transferred to the developer.

Conflicts of interest

The developer can be an associate of CapitalRise. This means that CapitalRise individuals associated with the developer will be responsible for setting interest rates on loans and may be responsible for taking recovery action against the developer.

An association between CapitalRise and the developer will always be disclosed on the ‘Investment opportunity’ page. Any investment returns quoted will not be affected by CapitalRise's fees, regardless of the identity of the developer. The Company's Head of Recoveries will never hold an office with the developer and is obliged to prioritise the interests of investors over the interests of the developer. Investors will be able to vote on how to deal with a developer defaulting on a loan.

Effect of CapitalRise insolvency

We are responsible for providing staff to monitor the developer’s repayments. If we become insolvent, you will still be entitled to pursue your rights against the Company and the developer, but you would need to take such action directly.

Developers repayments to investors also take priority over any outstanding fee payments they need to make to CapitalRise (fees they have already paid will not be taken into account.)

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, for example, through mis-selling or maladministration of your money and investments. The FSCS covers amounts we owe our customers in the event of our insolvency, up to a maximum of £50,000 per customer. Further information is available from the FSCS at www.fscs.org.uk

Investment advice

We do not provide investment advice. If you are unsure of the financial consequences of investment and how they apply to you, you should seek advice from an appropriately qualified independent professional (see www.unbiased.co.uk).

The CapitalRise service accommodates investors who can either assess investment risk for themselves or will seek independent professional advice.

Taxation

We do not provide tax advice. If you are unsure of the tax consequences of investment and how they apply to you, you should seek independent advice.

Returns are always quoted without taking the effect of personal taxation into account. Any changes to the taxation environment or a change in the tax treatment of the Company may affect your investment returns. The Company is required to withhold tax (currently at the rate of 20 per cent) from payments of interest to most individuals.

Interest rate and price movements

Increases in market interest rates and price inflation may affect the re-sale value of the fixed rate investments adversely

Decreases in market interest rates and deflation can have a positive impact on the value of fixed rate investments.

Redemption of bonds

Bonds can be redeemed at any time. You will forego interest payments that may have been paid had the investment been redeemed later.

Whenever the bonds are redeemed you will receive your capital and any interest that has accrued up to that date.

Voting

You have limited control over your investment. Decisions on matters affecting the investment can be taken if you do not vote, or vote with the majority.

The terms of investment contain provisions for calling meetings of investors to consider matters affecting their interests generally. These provisions permit defined majorities to bind all investors including investors who did not attend and vote at the relevant meeting and investors who voted against the majority. Please note that holders of bonds are not shareholders in the Company and do not have the rights that shareholders would typically hold.

Change of law / tax

Changes in law (including tax rates) may affect the property, the Company and/or the bonds in a manner which reduces the value of the property and/or the bonds. We cannot guarantee that no such changes will be made.

Capital at risk. Interest not guaranteed. See key risks.