19 October 2020
A highly attractive scheme in Surrey has tempted CapitalStackers to invest outside their normal corridor of expertise in the North – and also to partner with a new senior lender.
A luxury apartment project aimed at wealthy downsizers, a prestigious street and an affluent and popular village combined with an experienced, high-quality borrower to convince the CapitalStackers team of the scheme’s worth, and investors clearly agreed as the £950,000 required to fund part of the land purchase was raised in four days.
With the borrower tabling equity of £810,000 and a personal guarantee for the whole CapitalStackers loan, Shawbrook Bank entered its first ever partnership with CapitalStackers – putting up the senior debt of £8,014,000 which will fund the remainder of the land value and 100% of the construction costs. This, as regular investors will know, fulfils CapitalStackers’ prerequisite, namely that the entire scheme should be fully funded to completion before any of its investors part with any cash. Such a condition may have seemed over-cautious to its competitors pre-COVID 19, but has proved its value in recent months as other platforms have run out of investors midway through construction.
So with a total debt of £8,964,000, the completed scheme (post Covid-19) is valued by Strutt & Parker at £12.33 million – an overall £529 per sq ft with a gross rental value of £508,800 per annum for the 14 spacious two-bedroom apartments with 28 covered car spaces. Each bedroom will have an en-suite and fitted wardrobes. Each apartment will have its own laundry room and enjoy the added appeal of landscaped gardens and water features. The block is prestigiously placed on leafy Furze Hill in Kingswood, Surrey, 30 minutes from Gatwick and Heathrow airports, and a pleasant walk from the rail connection to London Bridge (50 minutes), and the good local amenities in and around the village including two golf courses.
The CapitalStackers investors were offered a choice of three risk/reward layers – and competed to earn from 10.19% at a Loan-to-Value of 68.3% up to 14.36% at 74.6% LTV. Regular investors will have noted that even at the highest risk layer, the housing market would need to fall by 25.4% before their loans would not be repaid in full and their investment is ringfenced with a personal guarantee from this asset-rich borrower – facts which partly explain why CapitalStackers investment schemes tend to be oversubscribed and sell out within days, hours or even minutes of publication.
As always, the CapitalStackers team exercised comprehensive risk modelling on the site, borrower, COVID, possible threats to sales and cost overruns. On the Sensitivity assumptions, 8 properties would sell within 10 months of practical completion reducing the LTV ratio to 50.8% and rental values would provide gross interest cover of 1.08% assuming an interest rate of 4.5%. This downside scenario demonstrates the opportunity to refinance the remaining 6 units in the event of sluggish sales. The Base Case indicates the project will be fully sold out within 7 months of completion.
Risk assessments complete, the legal due diligence was expeditiously completed in two weeks to meet the Borrower’s site acquisition completion date and strong working relationships developed between the senior lender, broker and borrower which helped the lawyers to make this happen.
This deal highlights yet again that even in straitened times, the CapitalStackers model provides valuable opportunities for sound borrowers and investors looking for prudent, high-value returns.
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