Capital at Risk. Your investment can go down as well as up and you may lose some or all of the funds invested. There are a variety of risk factors you should consider and know about:
Part of the success of the Group’s business correlates with the performance of the real estate markets in the UK. Because the performance of real estate markets is largely driven by changes in the overall economy, part the Group’s business being the apartment hotel business is affected not only by factors that impact the residential real estate market specifically, but also factors which impact the wider economy, including interest rates, GDP growth and inflation rates. Real estate markets tend to fluctuate with asset values reflecting both positive and negative developments. Demographic, economic, political and market factors may have an impact on the Group’s apartment hotel business.
The Company is a recently formed entity which has not yet commenced operations. It therefore has no track record of past performance or meaningful operating or financial data on which potential investors may base an evaluation.
The value of sites can fluctuate depending on external factors. This could mean that the asset is valued at a sum lower than the combined acquisition and development cost.
When considering development project investments and development risks, the Group needs to make an estimate of the economic and market conditions that will prevail in the market where the project is located at the time the project is completed and becomes operational, and there is uncertainty at the beginning of a development project about the economic and market conditions at the time of completion of the project. During this time, economic conditions may change unfavourably and lower the Group’s expected return on the investment.
There are also technical risks associated with such development projects. These include risks of constructional defects, other concealed defects or deficiencies, damage and contaminations. If technical problems do occur, it could result in delays in scheduled real estate development projects, or increased costs for upgrade of the Group’s properties. Technical problems could also arise from the actions or omissions of third parties and may not be known to the Group. Although the Group may have rights against third party sub-contractors in connection with such defects and/or recourse to insurance in place for the project in question, there can be no assurance that the Group will be able to enforce its rights and fully recover the costs arising from any claim against the Group.
Furthermore, the Group may not be able to obtain the necessary decisions or permits from local and/or regional authorities that are required to implement a change in the use of acquired properties and changes in permit, plans, planning law or regulations may result in delays in construction works or other unforeseen delays, increases in the cost of construction and construction materials, cost overruns or the failure to complete the Group’s real estate development projects.
If one or several of the above factors would develop negatively or if any of the above described risks would materialise, it could have a material adverse impact on the Group’s operations, earnings and financial position.
Inflation rises could mean that your fixed rate investment does not appear as attractive.
It is important to regard your investment as a long-term investment, and it may not always be possible to withdraw funds at an early stage or find a suitable purchaser for the bond.
Asset backed does not guarantee all capital can be repaid. The Collateral securing the onward investments using Bond funds will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections permitted under the Security Document. The existence of any such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the Collateral securing onward investments using Bond funds as well as the ability of the Security Trustee to realise such security.
The Bonds are not protected by the FSCS. Therefore, if the Company were to become insolvent or go out of business, holders of Bonds may lose all or part of their investment in the Bonds and no government or other body would be required to compensate them for such loss. FSCS protection may apply to deposits, subject to the FSCS eligibility criteria. Deposit protection applies when money belonging to investors is held in the Client Account. With investments in the Bonds, this occurs initially when investor money is transferred to us to make an investment and when interest repayments and the repayment of capital are being held on behalf of Investors. While the money is in a Client Account (which is likely to be a short period) it is protected by the FSCS deposit protection which is currently £85,000 per person. This Client Account is operated by the ISA Manager or a client money services provider appointed by the ISA manager.
The Group may not always be in a position to carry out its disposal and investment strategy at a favourable time or under favourable market conditions and may be forced to defer to fluctuations in the real estate market.
The proceeds from the Bonds will be on-lent to the Group to be utilised to acquire and develop assets. Should the anticipated investment flow fail to meet the expected target amount, the Group may be unable to deploy funds to acquire and or develop any assets. There is a risk that if there are insufficient investment funds, the Group will not meet its loan-to-value borrowing ratio and secure debt and thus be unable to deploy funds.
The Company has the right to repay the Bonds early to allow the Company to wind up its business if that was preferable to carrying on, in accordance with the Terms and Conditions, and if this were to happen the length of an investment in the Bonds could be materially shortened, as too the period over which Interest is paid.