You could lose all your money invested in this product.
This is a high-risk investment and is much riskier than a savings account.
ISA eligibility does not guarantee returns or protect you from losses.

What are the risks of investing in property?

Key Risks

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

In addition to these risks you should review specific investment risks located on each investment opportunity deal page before investing.

General Investment Risks

How this applies to you

CAPITAL AND INCOME RISK

Your capital is at risk. You may lose all capital invested and income is not guaranteed.

CapitalRise will always take a first or second legal charge over the property on your behalf. This means the borrower cannot sell the asset without first repaying the loan or allocating proceeds from the sale to repay it. A legal charge does not guarantee the repayment of your investment.

In the event a borrower is unable to repay a loan CapitalRise would seek repayment through enforcement of the legal charges. If the loan is secured with a second legal charge CapitalRise would work alongside the senior lender to enforce the security.

In case the repayment of a loan - either by the borrower or through a forced sale - should take longer than the stated estimated investment term, each investment includes a 'buffer' period (typically 10-12 months). During this period investors will continue to accrue returns at the same rate.

SECOND CHARGE RANKS BEHIND FIRST CHARGE

Where there is a second charge over the property, this ranks behind a first charge held by another lender, usually a bank. This means that the bank will have to be repaid in full (including repayment of its costs) before you receive your return of capital and income. 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.

If the borrower is unable to repay or refinance the loan CapitalRise, along with the senior lender would seek to force the sale of the property on behalf of investors. If a sale is achieved the sale value would need to be equal to or less than the current value of the loan before invested capital and accrued returns are at risk. A forced sale may not be achieved or the sale value may be less than the outstanding value of the loan.

If the bank did object to the sale of the property, this would impact the repayment of CapitalRise investors. This may be the case should the sale value not be sufficient to cover the repayment of the loan.

INVESTMENT LIQUIDITY RISK

CapitalRise investments are illiquid and you need to be prepared to hold this investment for the full term.

We do operate a Bulletin Board where you can post your investment for sale, but there is no guarantee of a buyer. CapitalRise charge a fee for this service. Before you invest, you should consider if you will need access to those funds should your circumstances change.

UK PROPERTY MARKET AND THE VALUE OF YOUR SECURITY

The repayment of your investment relies on the sale or refinance value of the property. Any future downturn in the UK real estate selling prices could materially adversely affect the value of your security, the borrower's motivation to complete a development, and the borrower'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.

CapitalRise investments have previously had loan to value ratios between 46.4% and 74% meaning that the property value would have to fall between 53.6% and 26% (depending on the investment) for investors' capital and return to be at risk. The return to you would diminish proportionally if the sale proceeds reduced below these values.

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.

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.

For development loans funds are released to the developer in monthly tranches in arrears. CapitalRise engages an Independent Project Monitor who will verify the amount being released matches the amount that have been spent in the previous month and verifies the works have been completed, only then are funds released. The Project Monitor will also monitor the project's adherence to its budget and programme. Any cost overruns would be identified early and the borrower would be obliged to cover the cost overrun before further funds could be released.

Investors will be provided with Quarterly updates to inform them of the progress of their investment.

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 or after an investment, you will not earn interest on it during that time.

You can deposit funds in your CapitalRise cash account at any point.

The first date of settlement for an investment will be stated on the investment opportunity page. After this date we will process funds at least every two business days.

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 borrower.

CONFLICTS OF INTEREST

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

An association between CapitalRise and the borrower 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 borrower. 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 borrower defaulting on a loan.

EFFECT OF CAPITALRISE INSOLVENCY

As with any business, there is a risk that we may have to wind down or that we become insolvent. We are responsible for providing staff to monitor the borrower's repayments and for ensuring that you are repaid your capital and income. If we become insolvent, you will still be entitled to pursue your rights against the Company and the borrower, but you would need to take such action directly. This may take time and could delay the repayment of your capital and income.

CapitalRise takes this risk extremely seriously and ensures that it has an up to date Wind Down Plan. If the Firm did have to close, we would aim to do so in an orderly manner and in such a way that we could continue to service the outstanding loans until redemption.

Should the Firm be declared insolvent however, borrower's repayments to investors would take priority over any outstanding fee payments they need to make to CapitalRise (fees they have already paid will not be taken into account). Security relating to each investment is ringfenced through the Security Trustee and is therefore protected in case of the insolvency of CapitalRise.

COMPENSATION SCHEME

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

You cannot claim FSCS compensation if your original investment or returns are lost. Uninvested funds held as client money at our custodian are however covered under the FSCS deposit scheme up to £85,000 per person.

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 have taken independent professional advice. If you are in any doubt as to your ability to withstand or understand the risk of these investments, we encourage you to take advice from an independent financial advisor.

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. On loans where interest is paid quarterly rather than paid at the end of the investment term 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

Interest rate risk is the risk that changes in the underlying interest rate could affect the value of your return. While an increase in the market interest rate could adversely affect your investment, conversely a decrease in market interest rates and deflation could have a positive impact on the value of fixed rate investments.

REDEMPTION OF BONDS

Bonds can be redeemed by CapitalRise at any time if a loan is repaid ahead of schedule. 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.

INVESTMENT STRUCTURE

When you invest you will be issued bonds by a subsidiary property company (a 'Special Purpose Vehicle') that is dedicated to the opportunity you invest in. This property company makes a loan to the borrower. It is not an ongoing trading vehicle and does not have other avenues of generating income or returns. This makes the investment higher risk.

The CapitalRise service accommodates investors who can either assess investment risk for themselves or will seek independent professional advice. If you are unsure of the financial consequences of the investment structure and how they apply to you we recommend you seek advice from an appropriately qualified independent professional (see www.unbiased.co.uk).

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 he property and/or the bonds. We cannot guarantee that no such changes will be made.

The CapitalRise service accommodates investors who can either assess investment risk for themselves or will seek independent professional advice. If you are unsure of the financial and/ or tax consequences of the investment structure and how they apply to you we recommend you seek advice from an appropriately qualified independent professional (see www.unbiased.co.uk)

BREXIT RISK

The lack of clarity and general uncertainty regarding the UK's future relationship with the EU is likely to increase market volatility and may impact buyer and investor confidence in the UK property market. This may adversely affect the timing and level of resale volumes.

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 and returns to be at risk. On a typical CapitalRise investment this would need to be a fall of more than 37%. If the investment did fall by a higher percentage, your returns would reduce proportionally.

Covid-19 Risk

The outbreak of Covid-19 may impact the borrower's ability to complete the project or repay the loan on time.

The impact of Covid-19 on the economy, workforce and supply chains mean borrowers and developers may encounter unforeseen issues which result in delays to construction programmes.

In the event a borrower is unable to repay a loan CapitalRise would seek repayment through enforcement of the legal charges. CapitalRise would work alongside the senior lender if the loan is secured with a second legal charge. The sale value achieved would have to be less than the value of the loan before capital and accrued returns are at risk. If the sale value was less than this amount, your returns would be reduced accordingly.

If repayment of a loan- either by the borrower or through a forced sale- takes longer than the stated estimated term each investment includes a 'buffer' period (typically 10-12 months). During this period investors will continue to accrue returns at the same rate.

Your capital and returns are however at risk. As noted previously, the investments are illiquid, and we do not encourage you to invest any funds that you may need to access should your circumstances change.