PRIVATE INVESTORS CLUB

Transcription

1

2 PRIVATE INVESTORS CLUB Aim The purpose of the Private Investors Club is to provide clients with the opportunity to access bespoke investments in flexible and tax transparent structures. Members of the investors club will be entitled to receive exclusive investment promotions and ultimately be given the opportunity to invest. Examples of investments can be found within this document. About Custodian Capital Limited is a specialist subsidiary of Mattioli Woods plc authorised and regulated by the Financial Conduct Authority (FCA) as an alternative investment fund manager and authorised to establish and operate unregulated collective investment schemes for high net worth individuals and sophisticated investors. Whilst Custodian Capital Limited is fund manager to a large, and ever growing, Real Estate Investment Trust ( REIT ), it also has the ability to facilitate and manage other bespoke investments that are not always property specific. To date, we have provided both short-term and long-term property finance and co-invested equity, all of which have been secured against underlying assets. As fund manager to Custodian REIT, we are able to offer retail investors an attractive income return from a main market listed, diversified property fund. However, we are distinctly aware that more experienced investors are looking for higher yields from more varied investments, albeit in exchange for accepting a higher degree of risk. The Private Investors Club was established to suit the sophisticated and high net worth clients of Mattioli Woods plc and provide for such investment opportunities. The rationale for these investments is further compounded by the lack of income return currently derived from what are perceived to be lower risk asset classes. Custodian Capital Limited provide a full investment service to include: Sourcing deals Conducting all the necessary due diligence Preparation of thorough investment documentation Offering investments to members Annual management of the investment and the exit We consider all alternative market sectors such as real estate, unquoted shares and commercial finance in order to create further diversification across investors portfolios. Benefits Becoming a member of the Private Investors Club will give access to considerable benefits in terms of investment diversification and potential returns; however, investors will need to be aware of the risks. Here possible investments will offer some or full capital protection if circumstances allow. Membership is exclusive to investors who satisfy specific eligibility criteria as summarised on page 20 of this document. In general, these investments will be categorised as either: Not regulated by the FCA and therefore not benefiting from regulatory supervision and protection; or as Non- Mainstream Pooled Investments (NMPIs), which are regulated by the FCA, but under very specific legislation. Members will benefit from: Private equity investments Low correlation to investment markets High target returns Exclusive access to bespoke investments Low cost of entry Fully managed propositions Investment diversion Contact For more information on this service, please contact the Custodian Capital Limited team on , making reference to the Private Investors Club, or contact your financial adviser. Alternatively, please complete the enquiry form on the Forms tab at and a member of the team will be in contact with you. Custodian Capital Limited is registered in England number Custodian Capital Limited is authorised and regulated by the Financial Conduct Authority. A Mattioli Woods plc company. 1

3 CASE STUDY DEVELOPMENT FINANCE, BATH Development finance syndicate, Bath 1-year investment Return of 10% per annum Residential sector To provide development finance to an established property investment and development company for the redevelopment of the upper floors of an historic city centre building in Bath, in order to provide 4 one-bedroom flats and 1 two-bedroom flat. A private syndicate constituting members of the investors club was created. Members were entitled to invest a maximum of 50,000 in order to raise the required amount of 500,000. Investors were eligible to use SIPPs, SSASs or invest personally. Returns Syndicate investors received 550,000 (10% return) which included a return of capital and loan interest, net of the loan arrangement costs. This was payable on whichever came first, 12 months from the loan agreement or practical completion of the redevelopment. The syndicate held a legal charge over the property. In the unlikely event that the developer was found to be in breach of the loan or development agreement, the syndicate had step-in rights to complete the redevelopment. This provided additional security and plenty of headroom to repay the syndicate loan. Outcome The redevelopment was completed within nine months of the loan agreement and investors received a net return of 10% within 30 days of completion. 2

4 CASE STUDY ACQUISITION FINANCE, BELFAST Acquisition finance syndicate, Belfast 3-year investment Return of 8% per annum Commercial sector To provide acquisition finance to a Northern Irish property developer, in order to secure a retail park near Belfast with further development potential. The site, with two fully let units, was acquired for 400,000. The developer s intention was to seek further planning permissions and develop additional units on the site. A private syndicate constituting members of the investors club was created. Members were entitled to invest from 10,000 to a maximum of 50,000 in order to raise the required amount of 400,000. Investors were eligible to use SIPPs, SSASs or invest personally. Returns The syndicate members were paid an annualised return of just over 8% on their investment over the 3-year term of the loan. This return was net of all costs but not tax. The property was valued at acquisition at 800,000, despite an agreed purchase price of only 400,000. In return for the acquisition finance, a comprehensive loan facility agreement and personal guarantee were agreed giving first charge over the site to the syndicate. Outcome The developer secured planning consent and subsequently developed a new unit let on a long lease to a blue-chip tenant. Terms for a lease with a new tenant were also agreed on one of the existing units. The site was valued in the region of 1.2m- 1.3m and the borrower was able to successfully refinance the syndicate at the end of the 3-year term having paid all interest on time through the loan period. 3

5 CASE STUDY ACQUISITION FINANCE PARTNERSHIP, BELFAST Acquisition finance partnership, Belfast 18-month investment Return of 12% per annum Commercial/Student Accommodation sector To provide acquisition finance to an established property development company for the purchase of a site on York Street, Belfast, with a view to securing planning permission to convert existing office space to a 407-bed student accommodation scheme. 123/127 York Street Redeveloped Campus for University of Ulster For identification purposes only At the time of lending, Belfast had the tenth largest student population in the UK, but was the only university city in the top 10 to have had no private purpose-built student accommodation. Across the UK purpose-built student accommodation market, there was an average of 7.76 students per bed. In Belfast, the figure was 13 students per bed. Even if all current planning applications in Belfast gained consent, this figure would still have been as high as 10 students per purpose-built bed. In short, there was a distinct shortage of supply and pipeline supply for student accommodation. A limited partnership constituting members of the investors club was created. Members were entitled to invest a minimum of 25,000 in order to raise the required amount of circa 1.8m. Investors were entitled to use SIPPs, SSASs or invest personally. Returns The partnership, in addition to a full repayment of capital, received a total return of 18% for the 18-month loan. This equated to an annualised return of 12% of their subscription amount and was net of all costs but not tax. In the event of default, the partnership had a first legal charge over the property. Outcome The developer secured planning permission for the demolition of the existing building and erection of a 12-storey mixed use building with a ground floor retail unit, 407 managed student accommodation rooms (with communal living rooms, kitchens), associated reception/office facility and gym in March Investors received an associated interest and return of their initial subscription amount on the maturity date of the loan. 4

6 CASE STUDY ACQUISITION AND DEVELOPMENT FINANCE SYNDICATE, BELFAST, UK Acquisition and development finance syndicate, Belfast 1-year investment Return of 9.5% per annum Residential sector The syndicate provided finance of 700,000 to Expedia Capital Limited in order for it to acquire and complete Springhill Meadows, a partially developed residential scheme off the Ballygomartin Road, Belfast. Expedia Capital intended to sell on the completed units and refinance the syndicate with a return of capital and interest. Ten units were completed previously and were sold between September 2012 and February The apartments within this element of the scheme achieved a sales price of 60,000 each. A private syndicate constituting members of the investors club was created. Members were entitled to invest a minimum of 25,000 in order to raise the required amount of 700,000. Investors were eligible to use SIPPs, SSASs or invest personally. Returns The syndicate, in addition to a full repayment of capital, received a total return of 9.5%, net of all costs but not tax, of their subscription amount for the 12-month loan. Payment was received on the day the loan matured. The borrower provided a personal guarantee for the full loan amount and interest payment. In addition to this, there was an agreement between Clear Homes, another company owned by the borrower and Expedia Capital to purchase any of the units that were unsold on the open market after a 12-month period from the date of the loan agreement. Outcome The houses were completed and sold on the open market. 5

7 AGRICULTURAL LOAN INVESTMENT, UK Multiple finance partnerships & investments 3-5 year investments Forecast returns depending on investment structure:- 5% per annum plus bonus payment (potential total annualised return of 8%) 7% per annum 10% per annum Agricultural sector Custodian Capital Limited has partnered with a specialist agricultural real estate and mortgage investment business who arranges alternative funding sources for farmers and agribusinesses. Members of the Private Investors Club had the opportunity to provide finance, secured against agricultural land assets, with returns linked to the Knight Frank Farmland Index. Whilst farmland falls under the general classification of real estate, it has a number of unique characteristics when compared with other forms of real estate. This has had the effect of sheltering farmland assets from the more extreme falls in commercial and residential property values during the recent global financial meltdown. Agricultural investments also have a weak correlation to other mainstream investments and therefore provide a good argument for inclusion into a mixed portfolio, to reduce risk and boost overall portfolio performance. Private syndicates and limited partnerships constituting members of the investors club were established. Members were entitled to invest a minimum of 25,000 in order to raise in excess of 16m into a variety of opportunities. Investors were eligible to use SIPPs, SSASs or invest personally. Forecast Returns The investments are structured to facilitate lending for periods of 3 months to 5 years. Each investment has differing interest payments depending on the nature of the loan. 5-year loans attract a blend of both income, by way of a fixed rate coupon, and capital growth, by way of a bonus payment linked to the Knight Frank Farmland Index. 3-year loans produce an annualised net interest rate of 7.5% and the shorter term loans yield a net annualised interest rate of 10%. Capital protection is secured by way of a first legal charge over UK agricultural land and buildings. The total loans do not exceed an average of 65% loan to value. All loans are underwritten and packaged up by Agri Partners, a specialist agricultural real estate mortgage and investment business. 6

8 EXISTING INVESTMENT PARTICIPATION EQUITY PARTNERSHIP, WARWICKSHIRE & LEICESTERSHIRE Equity participation partnership, Warwickshire & Leicestershire 2-year investment Potential return of 10% per annum Residential sector The partnership provided a capital contribution of 2,200,000 to nominated LLPs of Barwood Homes Limited, a well known Midlands based developer, by way of a formal agreement, to assist with the funding of two residential development sites in Shipstonon-Stour, Warwickshire and Wymeswold, Leicestershire. Overall levels of house building activity, despite the upturn in the market, are still considerably below the annual government targets for new builds. As a consequence, there is still a significant shortfall of housing supply in the UK. Demand for quality housing in prime locations in particular is outstripping supply. This therefore creates a great development opportunity. A limited partnership constituting members of the investors club was created. Members were entitled to invest a minimum of 25,000 in order to raise the required amount of circa 2.2m. To facilitate investment from SIPPs and SSASs investors an exempt unit trust was implemented. A trustee from the trust acted as a limited partner in the partnership on behalf the trust. Forecast returns The partnership has taken an equity position in both LLPs. As a consequence, investors will receive a percentage return of the profit generated from the sale of all the houses from each site. The forecast returns, should the development complete and each unit be sold to the timescale and guide price, will be in excess of 10% per annum. The partnership has a second legal charge over the sites. In the unlikely event that the developer is unable to fulfil their obligations, the partnership will have a second charge behind the senior lender. The development sites will not be purchased until there is fully implementable, detailed planning approval with any conditions being discharged as part of any reserved matter application. 7

9 ACQUISTION AND DEVELOPMENT FINANCE SYNDICATE, LEICESTERSHIRE Acquisition and development finance syndicate, Leicestershire 2-year investment Forecast annualised net return of 9.25% Hotel sector The syndicate provided finance to The Priest House Hotel Limited in order for the borrower to acquire the Priest House Hotel and the existing hotel business, as well as develop a lodge complex, spa and gym. A private syndicate constituting members of the investors club was created. Members were entitled to invest from 64,000 in order to raise the required amount of 1,200,000. Investors were eligible to use SIPPs, SSASs or invest personally. Forecast returns The borrower has agreed to pay a net annual interest return of 9.25% on the finance loaned by the syndicate in addition to a full repayment of capital. Interest is payable 6 monthly for a 36-month period. Investors have a second charge over the hotel and debentures over the operating business ranking behind the senior lender. In addition, the borrower provided a personal guarantee for the full amount of the loan and any interest due. 8

10 ACQUISITION FINANCE SYNDICATE NORTHERN IRELAND Acquisition finance syndicate, various Northern Ireland 3-year investment Forecast annualised net return of 8.0% Commercial sector The syndicates provided finance to various special purpose vehicles owned by one of our previous borrowers, Expedia Capital Limited, in order for them to acquire a number of industrial and retail units in various locations across Northern Ireland. The borrower has a good relationship with the banks in Northern Ireland and quite often has the opportunity to acquire assets, believed to be good value now, which the bank recovered during the financial crisis. The borrower will then either let or refurbish and let the assets before selling on. Private syndicates constituting members of the investors club were created. Members were entitled to invest from 25,000 in order to raise the required amount, which on average was in excess of 500,000 per loan. Investors were eligible to use SIPPs, SSASs or invest personally. Forecast returns The borrower has agreed to pay a net annual interest return of 8.00% on the finance loaned by the syndicate in addition to a full repayment of capital. Interest is payable annually for a 36-month period. Investors have a first charge over all of the assets acquired using the funds provided by the syndicates. In addition, the borrower provided a personal guarantee for the full amount of the loans and any interest due. 9

11 ACQUISITION AND DEVELOPMENT FINANCE PARTNERSHIP, MANCHESTER Acquisition and development finance partnership, Manchester 5-year investment Forecast annualised net return of 8.5% Residential sector The partnership provided finance to BH (Manchester) Limited, a special purpose vehicle owned by Stephen Beech, in order for the borrower to acquire a number of target assets in Manchester city centre and either convert from commercial to residential or refurbish them in the case of existing residential property. The finished product is designed to suit young professionals who require accommodation in central Manchester. Manchester is home to more than 70,000 students. It is suggested that over 60% of these students remain in Manchester once completing their higher education, given the prospects of securing employment and the fact that it is far less expensive than living in London. Given this demand, coupled with the well documented national shortage of housing, the city is under considerable stress to produce more living space. Most of the target assets are currently disused commercial assets into which the local authority is keen to breathe new life and the strategy of the borrower is to do just that. A limited partnership constituting members of the investors club was created. Members were entitled to invest from 25,000 in order to raise the minimum requirement of 2.5m. The final sum of 7m was raised from various sources as investors were entitled to use SIPPs, SSASs or invest personally. Forecast returns The borrower has agreed to pay a net annual interest return of 8.5% on the finance loaned by the syndicate in addition to a full repayment of capital. Interest is payable annually for a 5-year term. The partnership has an all assets debenture over the entirety of the undertaking and assets of the borrowing vehicle. In addition, the borrower provided a personal guarantee for the full amount of the loans and any interest due. 10

12 BUSINESS EXPANSION FINANCE PARTNERSHIP, LEEDS Business expansion finance partnership, Leeds 4-year investment Forecast annualised net return of 9.0% Residential sector The partnership provided a loan to Citu Group Limited, one of the UK s leading sustainable residential developers, in order to expand the business, refinance existing debt, fund asset acquisitions and invest capital into the company s housing product. In February 2016, the government commissioned the Construction Leadership Council to review the house building industry and the barriers preventing the UK from addressing its housing shortage. Alongside this, the government has set a target for all UK cities to have reduced their carbon emissions by 80% before Citu s business model is focused on the opportunities presented by these challenges, using modern methods of construction to deliver high quality low carbon, energy efficient homes. This therefore creates a great development opportunity. A limited partnership constituting members of the investors club was created. Members were entitled to invest from 25,000 to provide a minimum loan amount of 2,000,000. Investors were eligible to use SIPPs, SSASs or invest personally. Forecast Returns The borrower has agreed to pay an annual forecast return of 9%, net of all costs but not tax, of the amount subscribed for the term of the loan (maximum 4-year period). The borrower intends to pay all interest payments and a return of the original loan amount using cash flow provided for by the sale of units within current projects and interest from leased properties. The loan has been secured by way of an all assets debenture over the company subordinate to any senior debt facility across the group once deployed. The loan to value is not forecast to exceed 65% during the term of the loan. The loan to value is calculated using physical assets owned by the company, such as land and buildings, and is not based on valuation of the company s business undertaking. The asset value is determined by a RICS red book valuation of 31 million. 11

13 ACQUISITION FINANCE SYNDICATE, LEICESTERSHIRE Acquisition finance syndicate, Leicestershire 3-year investment Forecast Internal Rate of Return (IRR) of 15% Industrial sector The syndicate acquired a 12.2-acre site located on the A6 at Rothley, near Leicester, and provided for additional development related costs. The syndicate has appointed Rotherhill Developments Limited, a niche property developer and asset manager experienced in the development of business parks and industrial premises, to complete the construction and onward sale of the units. Analysis of active demand set against several key indicators of supply shows that the East Midlands is one of the most supply imbalanced regions for small and medium sized industrial units. The East Midlands has seen demand for its industrial space increase by 12% since 2015 and is 14% ahead of the annual average. The overall shortage of supply has had the impact of increasing rents in the East Midlands. Further rental growth is predicted in the Leicester market, which has seen rents increase 8.7% over the last 12 months with prime rents achieving 6.25 per sq ft. A private syndicate constituting members of the investors club was created. Members were initially entitled to invest a minimum of 150,000 to raise the required amount of 6,600,000 to acquire the site. This was raised from various sources as investors were eligible to use SIPPs, SSASs or invest personally. Forecast Returns Once the syndicate has received a full return of initial investment, it will then receive a priority profit share of 1,250,000, with the residual profit to be split 50/50 with the developer. The syndicate is forecast to yield an internal rate of return of 15% per annum of the subscription amount, net of all costs but not tax. A partial return of investment will be made to investors as each plot is sold prior to the commencement of development. The developer forecasts the construction and onward sale of the units to take no longer than 3 years from the date of acquisition. The syndicate gained security by way of ownership of the site on acquisition. 12

14 ACQUISITION FINANCE SYNDICATE, BELFAST Acquisition finance syndicate, Belfast 4-year investment Forecast annualised net return of 10.0% Commercial sector The syndicate provided a loan to Clearly Kids Limited, an experienced operator of children s day care nurseries in Northern Ireland, in order to refinance existing intercompany debt and provide for the development finance of a new nursery. A private syndicate constituting members of the investors club was created. Members were entitled to invest a minimum of 50,100 to raise the required amount of 950,000 to acquire the business. This was raised from various sources as investors were eligible to use SIPPs, SSASs or invest personally. Forecast Returns The syndicate, in addition to the full repayment of the capital, is forecast to receive an interest payment of 10% per annum net of all costs but not tax of their subscription amount for the 2-year loan. It is the intention of the borrower to repay the loan amount at the end of the term by refinancing the business. The syndicate has security by way of an all assets debenture over the company and supported by a personal guarantee from the borrower. 13

15 LAND PROMOTION AGREEMENT INVESTMENT PARTNERSHIP, MIDLANDS & SOUTH OF ENGLAND Land promotion agreement investment partnership, Midlands and South of England 5-7-year investment Forecast Internal Rate of Return (IRR) of 11 16% Residential development land The partnership provided an equity investment to a Special Purpose Vehicle (SPV), Welbeck Strategic Land III Limited, to secure promotion agreements over greenfield and brownfield sites across the Midlands and South of England, enable the vehicle to promote the sites through the planning system for residential led development and, subject to outline planning consent, market and sell the land for residential development. The major buyers of residential development land are housebuilders, and a significant percentage of that land is supplied by land promotors, such as Welbeck. England has suffered from a structural undersupply of housing since the late 1970s and estimates put the need for additional housing in England at between 232,000 and 300,000 new units per year, a level not reached since the late 1970s and two to three times the current supply. Increased demand is being generated by inter alia rising life expectancy, and the growing number of one-person households. Therefore, it is evident the demand for residential development land is naturally driven by demand for housing thus creating an excellent opportunity. A limited partnership constituting members of the investors club was created. Members were entitled to invest from 25,000 to raise the minimum requirement of 3,000,000. This was raised from various sources as investors were eligible to use SIPPs, SSASs or invest personally. Forecast Returns The partnership is forecast to receive a target IRR of 11-16% of the amount subscribed which is net of all fees, costs and corporation tax (ignoring those who invest personally). The SPV intends to provide full return of capital and profit on the forward sale of the land if planning permission is secured. As the investment is an equity investment, the partnership will not have security over the assets of the SPV and the SPV will not have security over any site. The SPV will be managed by their appointed asset manager, Welbeck Cognito Limited under a strategic property asset management agreement. Investor capital will be used to pay the costs associated with the SPV Land promotion agreements and, for any one successful onward sale, will be paid back to the partnership from the SPV s profit share. 14

16 ACQUISITION FINANCE SYNDICATE, LEICESTERSHIRE Acquisition finance syndicate, Leicestershire 2-year investment Forecast Internal Rate of Return (IRR) of 15% Residential sector The syndicate has provided a capital contribution of 400,000 and short-term bridging finance of 463,900, totalling an investment of 905,900, to a Special Purpose Vehicle (SPV), Walrus Vinyl Revival Limited owned by an experienced East Midlands based property developer. The SPV will employ the capital and finance to acquire a public house based in Tilton on the Hill, Leicestershire and build eight residential units. Comparable evidence for the local market suggests a price per sq ft ranging from 215 to just over 300, depending on the condition of the property and exact location. The market is very tight on supply, with only a handful of houses currently on the market in Tilton on the Hill itself. According to one of Leicestershire s leading independent firms of surveyors and estate agents, unique village properties are selling well and they are confident that this development will attract considerable interest in today s market. A private syndicate constituting members of the investors club was created. Members were entitled to invest from 25,000 to raise the minimum requirement of 905,900 to purchase the property. This was raised from various sources as investors were eligible to use SIPPs, SSASs or invest personally. Forecast Returns Investors are forecast to receive an IRR of 15% net of all fees and costs but not tax of the amount subscribed. The syndicate will receive a gross equity return from the development profit of 30% from the company. Investors will receive their equity return and original capital on completion of the sale of the last house. A senior loan facility will be drawn post acquisition to repay the finance and provide the costs of development. The finance will be secured by way of all assets debenture over the company and first charge over the site until the senior debt facility is secured, at which point the finance should be repaid. As the capital is invested by way of equity into the company in return for shares, it will be subordinate to any creditors and liabilities to the company, however it will rank ahead of equity provided by the developer. 15

17 ACQUISITION FINANCE SYNDICATE, WEST SUSSEX Acquisition finance syndicate, West Sussex 30-month investment Forecast Internal Rate of Return (IRR) of 15% Industrial sector The syndicate acquired a 6.4 acre site in Haywards Heath, near Crawley and provided additional development related costs. The appointed developer, a well-known UK industrial and warehouse developer, will build two industrial units in accordance with a development management agreement agreed by both parties. Real estate remains attractive relative to other asset classes and the fundamentals underlying the industrial sector continue to engage investors. Supply is now critically low in the South East region. The overall vacancy rate for the region is at a record low of 3.6%. The fall in supply was most apparent with units of sub 50,000 sq ft contracting by 20% year on year. Demand for sites is strong from investors and developers seeking land for speculative development, although there are few options available. A private syndicate constituting members of the investors club was created. Members were entitled to invest from 35,000 to raise the minimum requirement of 4,467,307 in order to acquire the site and provide for development related costs. This was raised from various sources as investors were eligible to use SIPPs, SSASs or invest personally. Forecast Returns Once the syndicate has received a full return of the investment amount it will receive a priority profit share of 300,000 to ensure the full subscription amount is returned before the residual profit is split 50/50 with the developer. The syndicate is forecast to receive an IRR of 15% which is net of all costs but not tax based on the subscription amount. The syndicate has full ownership over the site which already has the benefit of outline planning consent. Returns from the syndicate are, in part, secured against speculative development. 16

18 ACQUISITION FINANCE SYNDICATE, BUCKINGHAMSHIRE Acquisition finance syndicate, Buckinghamshire 1-year investment Forecast Internal Rate of Return (IRR) of 14% Residential development The syndicate provided a capital contribution, by way of an investment agreement, to a property developer based in North Oxfordshire to acquire a barn and associated land at Oakley, Buckingham. The developer will then convert the barn, which has full planning consent, into a luxury family house. The western edge of the Aylesbury Vale is a very popular residential area. The property is situated within easy driving distance of Oxford, home of the world class university and numerous other schooling options as well as the renowned retail outlet, Bicester Village. Demand for high quality family homes is strong, with a potential sale value of the conversion of around 1,340,000, reflecting a capital value of 375 per sq ft. This pricing assumes a plot size of around acres surrounding the property. The remaining 21 acres will be offered as a separate lot with the base price of 10,000 per acre. A private syndicate constituting members of the investors club was created. Members were entitled to invest from 38,000 to raise the capital contribution of 705,425 to acquire the site. This was raised from personal investors only, as this investment was not suitable for pension scheme investment due to tax implications. Forecast Returns Capital will be returned to the syndicate with the forecast equity return upon the sale of the completed development. Investors are forecast to be paid an IRR of 14% net of costs but not tax. The profit share is structured to incentivise the developer to perform ahead of the agreed timescales and to achieve a higher sale price. The company will provide the syndicate with the capital and associated return from the profit generated from the sale of the residential unit. As the capital is to be invested by way of equity into the company in return for shares, it will be subordinate to any creditors and liabilities of the company. The syndicate has priority internal rate of return of 14% prior to the company receiving any of the profit. 17

19 ACQUISITION FINANCE SYNDICATE, LONDON Acquisition finance syndicate, London 3-year investment Forecast annualised net return of 10% Residential development The syndicate has provided mezzanine finance to a Special Purpose Vehicle (SPV) under the ownership of the two directors of thesqua.re limited, an award-winning London based serviced apartments company operating prime London residential real estate. The SPV will initially acquire nine residential units to expand its already established serviced apartments business. The extended stay sector in the UK, including serviced apartments and aparthotels, is set to be the fastest growing hospitality sector over the next two years, outpacing the growth in supply. Global growth in the number of serviced apartments was at 18.2% for 2015 and by region Europe was the fastest growing with 42% growth over the year. Operator appetite for expansion, coupled with demand and current supply constraints, means that the sector is set to become an established and well recognised part of the global hospitality market with thesqua.re limited positioning itself to become a top 5 industry player. There are currently about 8,000 serviced apartments in London (which represents only circa 6% of its total hospitality stock), which could therefore grow to over 40,000 units if it achieves the same usage rate as for New York and Hong Kong. A private syndicate constituting members of the investors club was created. Members were entitled to invest from 40,250 to raise the required amount of 796,665 to acquire the residential units. This was raised from various sources as investors were eligible to use SIPPs, SSASs or invest personally. Forecast Returns The borrower will pay forecast income returns, based off the subscription amount over a period of three years as well as return of initial capital. The three annual payments and the loan redemption fee are forecast to aggregate to an interest return of 10% per annum net of all costs but not tax. The syndicate has taken security by way of an all assets debenture over the company, however this is subordinate to any senior debt facility once deployed. In addition, thesqua.re limited will commit to a two-year lease on the properties held in the SPV and calculated at the market rate. The borrower will provide 10% of the total acquisition price by way of equity which will rank behind the syndicate in priority to any charge. 18

20 DEVELOPMENT FINANCE PARTNERSHIP, SOUTH EAST ENGLAND Development finance partnership, South East England 5-year investment Forecast annualised net return of 9% Residential development sector The partnership has provided a loan to a Special Purpose Vehicle (SPV) incorporated by the specialist property company, Proseed Property Limited, in order to provide a revolving pool of short-term funding to experienced residential developers situated in the South East of England. A limited partnership constituting members of the investors club was created. Members were entitled to invest from 25,000 to raise the required amount of 3,000,000 to deploy to the developers. This was raised from various sources as investors were eligible to use SIPPs, SSASs or invest personally. Forecast Returns The partnership s forecast target return is 9% per annum based on initial subscription amount and is calculated net of costs but not tax. The term of the loan is 5 years; however, it may be that investors start to receive a return of invested capital earlier given that not all the development finance can be deployed for exactly 5 years. The loan is secured by way of an all assets debenture over the SPV, with the underlying development finance being secured by way of legal charge over the subject development site, other assets owned by the developer, company debentures and personal guarantee(s). The loan to value is not forecast to exceed 80% during the term of the loan. 19

21 ELIGIBILITY In order to qualify as a member of the Private Investors Club, individuals must be able to satisfy various conditions in accordance with the strict regulatory framework, as dictated by the FCA on the promotion of Non-Mainstream Pooled Investments (NMPIs). As a consequence, individuals or corporate entities must be able to be categorised under one of the following: An investment professional Authorised FCA Persons who are defined, according to the Financial Services and Markets Act 2000, as having professional experience of participating in NMPI for the purpose of their business. A sophisticated investor Investors who are self-certified, or who have been certified by an FCA Authorised Person as sufficiently knowledgeable to understand the risks associated with participating in a NMPI and who have signed a requisite certified sophisticated investor declaration form. A high net worth individual Investors who have self-certified, or who have been certified by an FCA Authorised Person, confirming that during the financial year immediately preceding the date on which the certificate was signed, held an annual income of not less than 100,000, or net assets of not less than 250,000, excluding their primary residence and benefits from life policies. High net worth companies Unincorporated associations, partnerships or trustees within the meaning of Article 22 of the CIS Exemption Order. For further clarity on eligibility, please contact either your financial adviser or Custodian Capital Limited. Please note that all memberships and investments will need to be channelled through a financial adviser. This document has been produced for information purposes. It is not intended to be an invitation to buy, or act upon the comments made, and all/any investment decisions should be taken with advice, given appropriate knowledge of the investor s circumstances. You must satisfy certain investor criteria before you can be considered eligible to invest. Any forward looking statements and forecasted returns represent the current views of Custodian Capital Limited and may be subject to change. Your capital may be at risk and past performance is not a guide to future returns. Mattioli Woods plc and Custodian Capital Limited are authorised and regulated by the Financial Conduct Authority. 20

22 Mattioli Woods plc MW House 1 Penman Way Grove Park, Enderby Leicester LE19 1SY Tel: Fax: info@mattioliwoods.com Mattioli Woods plc is authorised and regulated by the Financial Conduct Authority.