Investing in development loan bonds

Property Partner has launched a new fixed income property investment product on the platform – high yielding bonds secured against expertly selected property development projects.

Investment opportunities will be sourced and appraised by carefully chosen Lending Partners, industry experts with deep experience in property development and the origination of property development loans. All Lending Partners will be rigorously assessed and approved by Property Partner.

Property Partner investors will benefit from access to attractive investments from a selection of property development finance experts, providing the opportunity to diversify while knowing that each lending partner and investment have met the high standards of transparency, security and expected performance required to qualify for listing on the Property Partner platform.

As a result, Lending Partners have the opportunity to access new sources of capital, enabling them to complete larger loans more frequently.

How it will work: Property Partner development loan bond investment cycle

  1. Property Partner enters into a partnership with an expert Lending Partner, subject to:
    • Thorough due diligence of their business, senior team and relevant track record.
    • Agreeing attractive terms for our investors; i.e. strong expected performance with an acceptable level of carefully managed risk.
  2. The Lending Partner sources an opportunity to issue a loan to a property developer, and completes comprehensive due diligence on the project and developer.
  3. The Lending Partner completes the loan with their own capital providing certainty of the deal.
  4. Property Partner appraises the development project, developer and terms of the loan.
  5. Development loan bonds are offered to investors on our platform, typical term is 6-18 months, typical interest rate 6%-12% per annum, (after all fee and costs) depending on LTV and security.
  6. Property Partner investors acquire bonds and a majority stake in the loan, bond certificates are issued to investors.
  7. The Lending Partner retains a capital stake in the loan to ensure interests are aligned.
  8. Capital is repaid at the end of the term, Property Partner investors and Lending Partner break even at the same point.
  9. Property Partner investors are paid their interest, in preference to the Lending Partner.

 

Property Partner Due Diligence Process

Property Partner will use our in-house expertise to perform thorough due diligence on potential lending partners and investment opportunities before any are deemed suitable for listing on our platform, ensuring they represent attractive and transparent investments with carefully managed risk.

Lending Partner Due Diligence

  • Background checks on the business and its principals
  • Consult referees and mutual contacts in our network on their performance and professional conduct
  • Examining their track record in the relevant area of property lending
  • Meeting the principals on multiple occasions and building a working relationship to ensure we share common values and ambitions
  • Examining their due diligence of the projects they lend against and the developers they lend to, to ensure all risks are identified and adequately accounted for
  • Ensuring they have the pipeline and scope to deliver regular investment opportunities
  • Agreeing terms which offer the potential for a profitable long-term partnership, of benefit to Property Partner investors
Development Project Due Diligence

  • Our in-house property team review the full suite of material relating to the proposed project, examine the findings of the lending partner and produce our own assessment of potential sale value. By verifying the lending partner’s assessment of Gross Development Value (GDV) we can ensure the proposed loan offers genuine and material downside protection. An independent surveyor’s valuation is also provided by the lending partner to provide an independent assessment of the project’s GDV and carries professional indemnity insurance.
  • We research the local market to ensure that the GDV and expected rental values are commensurate for the local area in current market conditions.
  • Finally, our Director of Property, or an experienced member of his team, will visit every site before committing to a deal. This ensures that the project and local area meet the expectations set by the Lending Partner and enables us to make an independent assessment of any potential issues.
Legal and Financial Due Diligence

  • Initial review to ensure the terms of the loan represent an attractive investment with adequate security and meaningful downside protection.
  • Our legal team will comprehensively review all documentation relating to the loan, security and the bond, such as:
    • Loan agreement
    • Deed of registered legal charge
    • Security documents and associated trustee agreements
    • Bond document

Learn more about property development loan bonds here, and about the key risks associated here.

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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.