A loan note is a type of financial instrument. It is a contract for a loan that specifies when the loan must be repaid (the term or length of contract) and usually the interest that is payable on the loan (sometimes called a coupon).
The interest can be taken as income or rolled up and paid at the end of the term of the contract. When choosing the latter option, the returns are normally greater by way of a bonus or enhancement payment from the borrower.
Yes! As loan notes are normally secured against an existing property portfolio as a first or 2nd charge on the development. We would only introduce investors to secure loan notes issued by development companies with a demonstrable track record.
The time taken by a bank to make a loan decision is simply too long for property developers.
Property developers need to move quickly when buying and securing land or property in today’s competitive market. Banks will need to conduct formal due diligence on the land or building in question, as well as seeking all financial details on the issuing development company before making decisions on lending money. This will take precious time to complete.
As property developers cannot wait for the banks' decision-making process to take place, developers issue loan notes to investors, normally for only a short time period before securing replacement loans from banks, or more often *completely selling out the development to institutional buyers once they have purchased the land or building in question. (*known as forward-funding).
Yes! We would only introduce prospective investors to UK property developers that have an excellent track record of previous loan note payments
There are no fees or costs coming from your investment returns, the return payable on the loan agreement between you and the UK developer is paid directly to you!
We get paid by way of an introduction fee directly from the UK developers.
Land values increase significantly when planning permission is granted. Our UK team of experts will go through the planning process stage by stage to gain maximum added value from each piece of land purchased.
All investors receive shares in the special purpose vehicle set up to hold & own the asset, this means that your investment is secure as a percentage of the total value of the land both before & after planning permission is gained.
A special purpose vehicle or SPV is the name given to a UK registered limited company structure which will hold and own the land title and the land site.
What is the minimum investment amount? The minimum investment amount is £25,000.
Some do, but most prefer to buy land with planning permission already in place. Land with planning obtained makes it much easier to get a loan from the bank to develop or buildout the site, which is where developers make their profits. Also, obtaining planning permission takes time and this time taken with money tied up capital is viewed as a waste of valuable resources by the developer.
The main risk is the time taken to gain planning or planning refusal, however, this is greatly reduced by having an expert team select the land and apply for the correct planning use on behalf of investors.
Highgrove only work with experienced professionals with successful track records. We and the team often invest alongside our investors in projects.
Another possible risk is the time taken to complete the planning process & sale of the land. Although councils are supposed to give a decision on planning applications within a 13-week period, it can often take longer. The process leading up to application also takes time to acquire all necessary reports and information required to submit to the council to support the application. We look at all planning gain investments as having a 2-year investment term, and this should be carefully considered before investing.
No, but they are based on the gross development value of the site. The team must work backward from this value, making sure that the buyer of the land is happy with the potential profits they can make as developers. This leaves a profit for the investors that purchased the land and added value through the planning gain process which is reflected in the figure shown against each site at the time of offer.
Buying a house in the UK should be viewed as a long-term investment as there are high costs associated with buying. Stamp duty based on the house purchase price is often several thousand pounds alone, add to this the cost of borrowing, legal fees, agents’ costs and wear & tear and you can see that it might take a long time to get a real return on the investment. Also, UK capital gains tax payable on UK houses need to be considered. This is not the case with land planning and development.
No. Once planning is granted, the site is sold, and profits distributed as per the individual percentage of ownership in the special purposed vehicle holding the land.
A special purpose vehicle will be set up by the appointed lawyers which will purchase the land site. These lawyers will facilitate all financial transactions in the lead up to the purchase and hold the aggregated investment funds in their client account. Each investor will have to complete an ‘anti-money laundering’ financial statement & offer proof of residence before being able to transfer funds.
You will receive confirmation of receipt of funds from the lawyers used, as well as a share certificate showing your share of the total in the special purpose vehicle that holds and owns the land site. The SPV will be registered at Companies House and given a registered company number.