Strategic Residential Development (SRD) advance the proceeds of a bond issue to UK Property and Land Specialists Ltd (UKPALS).
UKPALS acquire residential property in southern England to apply for planning permission and thereby seek to increase the value of the property purchased.
Strategic Residential Development Plc was incorporated to give Bondholders the opportunity to receive an 11% annual interest on their investment funds, achieved through the Company lending monies for a term of 60 months to the Borrowing Company in return for a gross fixed interest rate of 12% per annum of which 11% per annum is paid to investors annually 12 months after the Bond is issued.
The Borrowing Company will use these monies as deposits on purchasing houses or land with potential to achieve short-term mortgages with a minimum bank mortgage of 55%. A system of site identification allows properties with real potential to be identified and the project to be re-sold within nine months.
The investor will be investing into secured non-transferable Bonds that receive a coupon of 11% per annum. The coupon will be paid annually after 12 months from the investment date and then annually for the duration of the investment being 5 years from the date of investment, the Directors’ at their discretion and subject to cash flows may redeem the Bonds at any time.
- Minimum Investment: £100
- 5 year non-transferrable corporate bond
- Asset Class: UK residential property
- Target Raise £20m
- Bond Coupon: 11% per annum paid on 12 month anniversary of investment
- Security: Bondholders have a debenture over all the assets of Strategic Residential Development PLC
The Borrowing Company will use bond funds that are lent to it, to acquire residential property, to secure planning permission and increase the value of the property purchased. A system of site identification allows properties with real potential to be identified and the project to be re-sold within nine months. The Company will be entirely reliant upon the Advisor and Manager to make sure the funds are invested in the manner as outlined in this Offering document and that the returns are as quoted in this document. Loans will be made at the end of each calendar month.
It is the purpose of this section to outline how investment monies will move from the Company level to Borrowing Company level and how income will then be returned from the Borrowing Company to the Company.
• The Company will advance the proceeds of the Bond Offering in the form of a loan to the Borrowing Company; there will be a loan agreement in place between the 2 entities. This loan will have a coupon of 12% per annum attached to it, secured against those items outlined in the security section below. The security of the loaned monies will rank second to the security that the bank will have, as banks will be required to lend money to the Borrowing Company to complete the property purchases in the form of a mortgage. (Bank debt of between 55% and 75% will be sought). Monies will be paid into the account of the Borrowing Company, subject to the verification and signing of the loan agreement, debenture and share charge agreements. The Company will have a debenture and/or such other security as advised by the Advisor and Manager over the Borrowing Company and its assets. The Bondholders will have a debenture over all the assets of the Company.
• The Company will advance the proceeds of the Bond offering to the Borrowing Company at the end of every calendar month, which will be utilised in accordance with this offering document and as outlined in the investment criteria below. Investors will receive interest corresponding to the month that their Bond is issued, (see “investment date”).
• The Borrowing Company in line with the investment strategy as outlined below will then utilise these loaned monies to purchase the properties. These purchases will be completed using bank debt.
• The Borrowing Company is an existing entity that will buy the land and property and then look to achieve planning permission and subsequent sale (with an option to purchase) of the houses and their plots.
• Revenue will be generated through the purchase, refurbishment and hopeful granting of planning permission, which will uplift the value of the houses and plots by on average 30%. Following the subsequent sale of the house and plot this will enable the Borrowing Company to be able to service the loan interest and repay the original loan capital back to the Company.
Target Fund Raise – £20 000 000
Bond Terms – 5 years (which may be extended to up to 7 years in SRD’s discretion)
Bond Coupon – 11%
Asset class held by UKPALS – UK residential property
Interest payment Terms of bonds
Interest is paid on each 12 month anniversary of the date the relevant bond was issued.
Security for the loan to UKPALS
SRD will have an English law debenture over the assets of UKPALS. The sole shareholder of UKPALS will also grant a charge over the shares in UKPALS to SRD. The sole shareholder of UKPALS will also grant share charges in respect of two other companies in which he is the sole shareholder and these two companies will also grant debentures to SRD.
Security for the bonds
The bondholders will have the benefit of a debenture over all the assets of SRD. SRD will grant the debenture itself to Global Custodial Services Limited (“GCS”), as security trustee. GCS will hold the benefit of the debenture on trust, and enforce the debenture, for the benefit of the bondholders.
UK property market
After several years of stagnation the UK property market is now being considered in the opinion of the Advisor and Manager an attractive investment. The government as explained below is stimulating the residential property market with their “New Buy”, “Help to Buy” and “First Buy” schemes. Mark Carney, the Governor of the Bank of England has just indicated that interest rates will stay at record low levels of 0.5% until unemployment falls to 7%. This will help sustain residential markets and house process for the next few years, but offers little solace for savers. The Halifax house price index showed a 4.6% rise in prices between May and July compared with the same period last year and house prices are rising at their fastest rate since August 2010, according to an index published in August 2013 (The Telegraph, 2013). These figures act as clear evidence that Government measures to stimulate the property market are feeding through.
Prominent residential estate agents, Knight Frank (July, 2013) concur, arguing that increased certainty about rates in the short to medium term, coupled with the “Help to Buy” effect, have boosted confidence in the housing market across the country. Savills (May, 2013) state that the improved activity is being driven by existing home owners with equity, as well as investors and, increasing numbers of first time buyers from a low base. According to the CML, lending to first-time buyers was 25% higher than January last year, accounting for 42% of all house purchase loans. The beginnings of a resurgence of first time buyer demand further indicates the positive impact that NewBuy (1) and FirstBuy (2) have had on the market. It is now predicted that the Help to Buy (3) scheme will boost private housing output by as much as 30%, and this is good news for developers as more land will be required to serve this increased output.
In addition to these changes within the housing market, the English Planning system has also undergone major changes over recent years in the form of the introduction of the National Planning Policy Framework (NPPF). The key policy strands of the NPPF that stand out are an emphasis on speeding up decision making and achieving a significant boost in the delivery of housing. To encourage this boost of housing provision, Local Authorities that have fallen behind with past delivery are required to make up for this by bringing forward an extra 20% of housing supply. Indeed, the NPPF has already begun to show its teeth with an increase in planning permissions witnessed (Savills, 2013). A policy environment such as this, where Local Government is under significant pressure from Central powers to deliver new housing creates a perfect time to invest in the business of gaining residential planning permissions.
1. New Buy – This scheme aims to help buyers who have a deposit of at least 5% to buy a new-build home. This is a smaller deposit than is normally required. The scheme allows more borrowers to secure up to a 95% loan-to-value mortgage on new-build properties (houses and flats) from participating builders in England.
2. FirstBuy -The FirstBuy scheme will enable an eligible buyer to purchase a brand new property, funded by an affordable mortgage and with assistance from a Homebuy Agency and any of the house builders who are participating in the scheme.
3. Help to Buy – ‘Help to buy’ comes in two parts. This first part, available from April 1 2013, is an extension of the FirstBuy equity loan scheme. It is open to anyone wishing to buy a new home – not just first time buyers and means you can buy with a 5% deposit. The second part is a scheme for the whole housing market to assist people buy with a 5% deposit.
Registered Office of the Company
Strategic Residential Development Plc,
c/o Hypa Management LLP,
Crown House, 72 Hammersmith Road, London, W14 8TH
Legal Advisors to the Company
As to United Kingdom law:
5 Chancery Lane, Cliffords Inn, London, EC4A 1BL
Directors of the Company
Steve Wright and Lee Smith,
c/o Hypa Management LLP,
Crown House, 72 Hammersmith Road, London, W14 8TH
Advisor and Distributor in the United Kingdom
Hypa Management LLP Crown House
72 Hammersmith Road London W14 8TH United Kingdom
Tax Advisors to the Company
As to United Kingdom and Offshore Tax LittleJohn LLP
1 Westferry Circus, Canary Wharf, London, E14 4HD
Auditor to the Company
1 Westferry Circus, Canary Wharf, London, E14 4HD
Advisor and Manager
UK Property Advisory Limited
St Mary’s House, Netherhampton,
Salisbury, Wiltshire, SP2 8PU
Security Trustee to the Company
Bay Consultancy Limited,
Po Box 1388, Trident Chambers,
Capital City Building, Victoria, Mahe, Seychelles
The Directors are responsible for the overall management and control of the Company. The Directors will hold regular meetings with the Advisor and Manager and the Advisor and Distributor to review the operations of the Company. It is the Directors’ current intention to hold these meetings at least biannually.
Initially spending the first 21 years of his working career with the British Police Force, Steve became somewhat of an expert in the area of counter terrorism and demonstrated at a national and international level his skill set in analytical problem solving. Steve now applies this rare and unique skill set in the technical structuring and due diligence processes for a company that he is also director of Project Kudos Group Limited, and internationally provides technical services to global businesses on behalf of Project Kudos Group.
Steve and his technical team are able to structure commodity based or real estate asset backed investment vehicles, which are held as best practice by many pension trustees and investment specialists within the UK and international markets alike.
A property entrepreneur of over 15 years, Steve has a proven method of analysing investment opportunities and maximising these to ensure they deliver. Steve now provides consultative services directly to UK based investment specialists and also to the greater international investment industry.
With more than a decade of proven expertise within international asset backed investments, Lee is now involved in what he describes as his most exciting project yet, creating innovative and ground-breaking investment products for the finance, commodities, renewable energy and real estate industries through the provision of alternative investments.
Having lived and worked internationally and dealt within many international markets directly by heading departments & regional divisions for some of the industry’s leading businesses, Lee has a wealth of experience which he now applies through being a director at the Project Kudos Group.
Lee’s main role with Project Kudos Group is new business relations, international investment, systems management and overall business development.
Lee has broad and diverse experience in tracking investment market demand, product innovation and market penetration. He is a respected figure within the investment industry, providing expertise and insight to many of the leading publications and groups, including monthly investment columns within OPP Magazine, frequent chairperson of The Investment Group Roundtable & positioned within several panels at investor events in London, US, Dubai and throughout Asia.
The Directors will make the ultimate decision on any management decision. The business address of each Director is c/o the registered office of the Company.
No Director has:
(i) any unspent convictions in relation to indictable offences; or
(ii) been personally bankrupt or the subject of a voluntary arrangement, or has had a receiver appointed to any personal asset of such Director; or
(iii) been a director of any company which, while he was a director with an executive function or within 12 months after he ceased to be a director with an executive function, had a receiver appointed or went into compulsory liquidation, creditors’ voluntary liquidation, or made any composition or arrangements with its creditors generally or with any Series of its creditors; or
(iv) been a partner of any company which, while he was a partner or within 12 months after he ceased to be a partner, went into compulsory liquidation, administration or company voluntary arrangement, or had a receiver appointed to any company asset creditors; or
(v) had any public criticism by statutory or regulatory authorities (including recognised professional bodies); or
(vi) been disqualified by a court from acting as a director or from acting in the management or conduct of affairs of any company.
The Company Secretary
The Company Secretary is Ian Philip F.C.A, who is a chartered accountant and a director of Lord Associates Limited, Chartered Accountants whose offices are Caxton House, Old Station Road, Loughton, Essex, IG10 4PE. Ian also has a background in general managerial and company secretarial experience, he has also held various senior positions in international financial services and media groups over the past 13 years.
The Advisor and Manager to the Company
The Advisor and Manager of the Borrowing Company and the Company is UK Property Advisory Limited, the director of which is Mr Graham Evans who maintains his offices at St Mary’s House, Netherhampton, Salisbury, Wiltshire, SP2 8PU. This Special Purpose Vehicle (SPV) Company has been established for the sole purpose of being the Advisor and Manager on behalf of the Company and for the Borrowing Company. Their sole role is to ensure that all properties are correctly purchased, has the correct title, registered and resold.
The Director of this company is Graham Evans, who is an Independent Financial Advisor (IFA). As an IFA, he has to adhere to strict codes of conduct and is completely independent from the Borrowing Company and the Company.
Advisor and Manager Role
It’s primary role is to safeguard the borrowed money from the Company to ensure that properties bought are bought:
(i) for the market price;
(ii) meet the criteria specified in the land potential checklist;
(iii) land is sold at up to 30% of OMV (Open Market Value);
(iv) are resold for OMV.
The Advisor and Manager is also responsible for monthly reporting on the situation of the Borrowing Company to the Company.
Payment for this role will come at the exit of the Bond (after 5 years) and will be 5% of the profits of the Borrowing Company after final interest and repayment of the Bond.
Having gained a Distinction at Masters Level in Town and Country Planning, Daniel was recruited by the Borrowing Company and placed with Richard to gain a wide range of planning experience, particularly in residential development. Recently, Daniel joined the Borrowing Company with his main role being the identification, assessment and delivery of sites for development.
Edward has 40 years experience as a successful local architect and has gained experience in housing development through working with builders and contractors, architects and as a project manager for a large developer. This included identifying potential sites and preparing feasibility studies prior to purchase and designing schemes based on site size and location together with knowledge of the market generally. Edward has worked as the lead architect to the Borrowing Company for the last 3 years and his portfolio of hand-drawn dwellings is considered an important asset.
Richard Greenwood – Managing Director at Benchmark Development Planning Ltd
Richard runs Benchmark’s London, Bath and Salisbury offices and acts for a wide range of clients including PLCs, Limited Companies and private individuals. He is particularly experienced with presenting evidence and reports that assess the potential of land and the strategy for those developments. His years at Sainsbury’s reporting to the Board allowed him to hone and develop those skills and build a large circle of contacts in the development world.
Upon successful launch of the bond Richard will be coming to work full time for the Borrowing Company.
Over the past 20 years Richard has secured planning permission for many schemes and has an excellent success rate. Most of his business is repeat or ‘word-of-mouth’ work. Benchmark does little marketing.
For the Borrowing Company Richard has secured planning permissions and other consents (such as Certificates of Lawful Development) on sites in Winterbourne Gunner, Winterslow and central Salisbury. There are also several new projects in the pipeline. Richard has also advised the company on strategic land in the region and helped develop the algorithm underpinning the USP IT model.
Nigel Weir (Managing Director) & David Jacobs (Profit Sharing Partner & Builder) from UK Property and Land Specialists Limited
UK Property and Land Specialists Limited was established in September 2010 as a property development company whilst Nigel Weir was successfully completing a double build with his builder David Jacobs. After completion of this double build in his sole name, Nigel Weir introduced David Jacobs into a profit sharing scheme of the Borrowing Company, but maintained 100% of the shares of the company. Following this, they have successfully built and sold 6 new builds (4 of which were sold pre-finish and for the asking price) and have established a solid reputation locally for the achievements they have made during this difficult economic period.
Previously, Nigel Weir was a successful businessman, buying and selling supermarkets around the UK with his late father.
David Jacobs had been developing his craft for the last 20 years, building and renovating a large number of houses, flats and commercial buildings.
In March 2012, with the help of Graham Evans, the Borrowing Company decided that due to the price of land being 30% of Open Market Value (OMV) that the majority of their potential profit was being made by somebody else achieving planning permission on the land that they purchased. Due to this, they hired two Town & Country Planners and an Architects, and launched a trial full-page advertisement in a local newspaper – ‘Do You Have a Potential Plot?’ This lead to over 60 site visits in 6 months, as the team decided that they would visit every single site that responded to the advert, with the intention that everyone could fully understand the assessment of whether the land had potential of achieving planning permission or not. Of these 60 only 5 proved to have any potential. One of which was signed up on an Option agreement subject to planning. This was which initially the intended business model for the plots. They later achieved planning permission on this site.
The others however, were houses with land that were already on the open market and the vendors were reluctant to enter into Option Agreements and just wanted to sell their homes. With this realisation, the business direction was immediately changed to searching for properties that were currently for sale on the open market, to identify land with potential of achieving planning permission for an additional dwelling[s]. To maximise cost effectiveness Buy-to-Let mortgaging was used as a tool for purchase. This gave two immediate benefits:
1. Only a 25% deposit was required as gearing is 75%;
2. As an as-good-as cash buyer, a buyer with a BTL mortgage is the start of a chain and can therefore negotiate the keenest price for the house purchase without disclosing that the land has potential.
Since this swift change of direction, 5 different houses have been purchased or are in the process of being purchased for varying prices and with varying levels of potential in Nigel Weir’s sole name. A test market with a 15 mile radius around Salisbury was initially set up. Currently the Borrowing Company is finding 4 properties with potential within a 20 mile radius of Salisbury per week. At this point, Nigel Weir and David Jacobs decided it was time to have a strategic partner/ source of investment.
As is outlined above, the rest of the team has experience of successfully achieving planning permissions for the last 40 years. They recognise there is nothing new about purchasing a property with land potential, but what the Borrowing Company have achieved is setting up a company and a team that are identifying sites immediately as they come on to the market, giving the Borrowing Company a significant advantage by using this team’s skills and knowledge.
Key Personnel Replacement Strategy
If in the eventuality of long-term illness, death, absence or departure of any of the key personnel we have a comprehensive strategy for replacement. With that said, what makes the Borrowing Company so successful is that they are an excellent team. However, each individual member has no special part that cannot be replaced.
Nigel Weir has a partner, David Jacobs who has been involved since the creation of the Borrowing Company and is instrumental in the direction they have taken. Both Nigel and David have shared in the negotiations and assessments of sites from the start. David Jacobs will become a Director of the Borrowing Company upon the launch of this Bond. Another Director, Neil Trewartha, is also being introduced and being trained in Nigel and David’s roles.
David Jacobs can be replaced by Nigel Weir or Neil Trewartha and his specialist building knowledge can be gained by hiring any reputable builder at any given time. As the Borrowing Company was initially a property development company they have completed many joint ventures with many local builders, so have good links.
Richard Greenwood – In the event of Richard’s departure two or three of the many local planning consultants would be brought in to replace him, working in competition with each other to determine who the best replacement would be. Competition in the Planning Consultancy market place is fierce.
Daniel Roycroft can be replaced by approaching one of the many universities with MA Town and Country Planning Course Graduates. A good quality replacement should be relatively straight forward to find as the graduate market is captive and competitive.
Edward Fry – Edward is the Borrowing Company’s lead architect, but other architects are currently employed for specialist CAD design work. There are many of architects looking for business on hourly rates. With this said, the Borrowing Company plan to produce an A-Z (26) of different house models so that, for most plots, the dwellings will already be designed and only need adaptation on CAD.