Tue 25 June 2019
Property News | Property Loan Notes
Property Loan Notes, sometimes called mini bonds are effectively loans secured by property developments offering a high rate of interest with limited risk. It allows developers to borrow without the use of banks, and share part of their profits with the owner of the loan notes rather than paying interest and fees to the bank.
The notes are designed specifically to offer investors an asset-secured, flexible and convenient way of accessing property market without purchasing property directly. Property loan notes offer investors the opportunity to receive high fixed returns over pre-determined length of time, typically from one year up to seven years. Terms vary and some pay interest periodically, either every six or twelve months with the capital repaid at the end of the term or the interest and capital are repaid together at the end of the chosen investment period.
So lets look at a couple of examples that we currently have on offer.
We have a 36 month loan note that is secured by assets of the company, with several developments put up as collateral wiith a view to raising £20m. Investment is from £20,000. In total the group have GDV (properties with an end value of) £210,000,000 in the UK and Dubai in a variety of assets from houses, to office blocks to hotels. It has an excellent track record. Interest is paid on the first year anniversary after twelve months then each quarter for years two and three. Interest is paid at 10% for the first year, 10% for the second year and a massive 18% for the third year as the developments matire and are sold/rented.re-financed.
The second offering is different. The experienced developers are raising funds in Liverpool to purchase a development in a sought after area that is not built. The planning permissions were changed allowing a deal to purchase at 33% below market value so there is immediate equity in the deal. Of the 400 apartments to be built, 95 have already been purchased with cash deposits of 25% of the purchase price being received. Again this derisks the deal as they have the cash and will take further funds when the property is completed. They offer a 24% return on a two year note. All the interest is paid at the end of the two year term
To conclude property loan notes allow sopisticated investors to lend to developers with high rates of interest as a result of taking part of the profits that the developer would usually be paying to a bank, giving short term access to the property market with pre defined exit route
The risk is liquidity. If all goes to plan then all is fine. The developer needs to be able to either sell the developments that have been put up as collateral or refinance them before the end of the term. Where there are high returns there is always risk, as any investor knows. So please speak to us to go through the investments to fully understand.
Overall the rates of return when interest rates from the bank are very appealing.
Please contact email@example.com quoting Loan Note in the subject heading with any questions or to receive the brochure and further information.