Regent House, Basildon, SS14
This investment has now closed for funding. We're working on bringing more loans to the platform. Check back soon.
Property Partner is delighted to offer an opportunity to invest in a bond secured against a residential property development, the first investment of its kind on our platform. This bond has a 15-month term and will yield interest of 10% per annum after all fees.
The investment comes courtesy of our strategic partnership with development finance and loan origination experts, Proseed Capital.
Proseed Capital will complete the loan with the developer using their own capital, thereby securing the deal for Property Partner investors. Proseed Capital will retain a minimum 5% stake in the loan, ensuring their interests are aligned with investors.
Learn more about investing in property development loans.
Development Loan Bond - Key Facts
· £1.23m mezzanine debt investment, loan originated by Proseed Capital
· £1.17m available for Property Partner investors (Proseed Capital retain at least 5% of the loan with their own capital)
· Expected sale value on completion (Gross Development Value) of £17.3m
· Total debt value of £11.8m including senior loan of £10.56m
· Total debt to Gross Development Value LTV of 68.2%
· Net interest rate of 10% p.a. after all fees (12.5% over the 15-month term)
· Property Partner investors receive their interest in full before Proseed Capital receive any interest
· Interest rolled up and paid at the end of the term along with capital repayment
· Second charge security against the development site; in addition to a £0.6m personal guarantee provided by the developer
· Investments made in the funding phase may be subject to scale back if the opportunity is over-subscribed
· Minimum investment: £1,000
Development details: Regent House, The Gore, Basildon, Essex, SS14 2EE
Regent House, Basildon is a development of 106 residential apartments under construction by London Green (Basildon) Ltd. The scheme promises to deliver high quality new build homes in a strategically attractive location, at an affordable level relative to properties available in the local market. In taking the loan from Proseed Capital as part of a larger package with a senior lender, the developer has secured additional funding to refinance a former loan and to fund the completion of the scheme.
· Developer - London Green (Basildon) Ltd (borrower of underlying loan)
· Office to residential conversion in central Basildon
· Development of 106 flats
· Site owned by the developer and planning permission granted (title deed and planning confirmation will be available when the loan opens for funding)
· Gross Development Value (GDV, or expected completed sale price) of £17.3m - as detailed in independent Chartered Surveyor Valuation Report
· Started in March 2018, with expected completion in Spring 2019 followed by a 9-month sales cycle
· Approximately a 10 minute walk to Basildon railway station, 30 minutes by train to central London
Property Partner's in-house expert property team has conducted due diligence on the scheme, including a review of the independent valuation and Proseed Capital's own due diligence. They have undertaken an assessment of value and exit options, as well as a site visit. They also agree with the demand within the local economy for these units once complete, especially given the proximity to London for commuting.
The Basildon development loan bond comes with the benefit of second charge security over the development site.
Pluto Finance, the senior lender, has first charge security over the development site up to a value of their loan plus interest, being £10.56m.
Property Partner investors have second charge on the development site which has an expected sale value on completion of £17.3m.
An inter-creditor agreement between Pluto Finance and Proseed Capital governs what happens in the event of a default by the developer.
The developer has also given a personal guarantee in favour of the Proseed Capital loan of £0.6m.
The loan is structured to correspond with the developer’s plan to complete the project in Spring 2019 and sell the units individually to owner occupiers and buy to let investors on the open market, over the following 9-month period. A show flat is close to completion, with a view to beginning to market flats for sale off-plan to get ahead of schedule. The developer will realise sufficient capital to pay off Proseed Capital’s loan, and thereby repay Property Partner investors’ bonds, once 68.2% of the £17.3m GDV has been received in sales.
If sales of the flats should not progress as expected, the developer plans to refinance the scheme and retain it as a rental investment, if required, using capital received from the sale of one of a number of more advanced projects to pay off the Proseed Capital loan. Proseed Capital’s analysis demonstrates that the completed flats have strong rental potential in the market and will deliver a gross yield of 6%.
While Property Partner expects the loan to run its full course, the loan can be repaid early by the developer. If the loan is paid back prior to the end of the 15 month term, interest will be paid on a prorated daily basis for the duration of the loan, with a minimum of 6-months interest due.
If the developer repays the loan after the end of the 15-month term, penalty interest may apply in line with any interest paid to Proseed Capital by the developer.
Watch: Introducing Development Finance
Listen: A Q&A with Proseed Capital
As with all investments there are risks. It’s important to understand the specific risks of development loan investments. Please ensure that you fully understand these before investing. Learn more about the risks associated with investment in property development loans.
Proseed Capital Due Diligence
Proseed Capital has used their in-house expertise to carry out a comprehensive assessment of the developer, the development project and the local market. Their due diligence has enabled them to conclude that:
- The developer has the capability, vision and resources to deliver the scheme as planned.
- The project justifies the expected sale value at completion (GDV) attributed by the independent valuation of Knight Frank, providing a significant safety buffer above Proseed Capital's loan at 68.2% LTV. You can download the valuation report here. (Please note the file size is 7.5MB)
- The local housing market has the strength to give confidence that there will be significant demand for the completed flats from potential purchasers or renters and that the expected values will be affordable for a wide range of buyers.
You can review Proseed Capital's due diligence document here.
Property Partner Due Diligence
Property Partner has completed its due diligence process and is satisfied that Proseed Capital’s loan to the developer, and the associated investment bond, represent a carefully considered, transparent and attractive investment, with appropriately managed risk.
- Lending partner due diligence - Proseed Capital are experienced operators with the expertise to arrange well structured property debt and investment products as well as carry out effective due diligence of the developer and their development project. Their senior team were already known in a professional capacity to our senior team.
- Legal and financial due diligence - Property Partner and its advisors have conducted due diligence on all aspects of the deal.
- Project due diligence - Our property team has visited the site, and analysed all available material relating to the project and agree with the conclusion of Proseed Capital and the independent valuation as to the expected GDV on completion, and the commercial viability of the flats for sale or rent.
Learn more about Property Partner’s role in assessing development loan investment opportunities and our lending partners here.
Transaction fee: 2% of funds invested, paid by Property Partner investors at the point of investment. This is the only fee Property Partner investors will pay.
Property Partner will also receive a conditional success fee payable by Proseed Capital to Property Partner once the loan has been repaid, and once investors’ capital and forecast interest has been paid in full.
We have designated this investment opportunity as only appropriate to clients who have self-classified as High Net Worth or Sophisticated Investors. You can check your classification by logging in to your account, navigating to the Personal Details tab under 'Investor classification'. If you feel your circumstances have changed since you last self-classified, you can reclassify by clicking the blue button.
Capital at risk. The value of your investment can go down as well as up. The Financial Services Compensation Scheme (FSCS) protects the cash held in your Property Partner account, however, the investments that you make through Property Partner are not protected by the FSCS in the event that you do not receive back the amount that you have invested. Past performance is not a reliable indicator of future performance. Interest and capital returned may be lower than expected. Property Partner does not provide tax or investment advice and any general information is provided to help you make your own informed decisions. Customers are advised to obtain appropriate tax or investment advice where necessary. Please read Key Risks before investing.