Participate Directly in Property Development
We enable you to invest directly into select UK and Australian property development projects
We work closely with a handful of trusted developers with whom we have co-invested over the years
We can team with you and our trusted business partners to make your development ideas a reality if you own land in the UK or Australia which has redevelopment potential
What We Do
We enable you to invest directly into UK and Australian property developments
Investing directly into a property development makes a lot of financial sense to the UK expatriate with a lump sum to invest. In respect of the UK, the Chancellor has incrementally made the returns from the buy-to-let investment model extremely unattractive (unless you are a company) through higher stamp duties; non-deductibility of mortgage interest; and liability for capital gains tax. That is it on top of the onerous TDSR regime (for the Singapore-based investor).
For the more sophisticated investor, maybe one who has become tired of endless bank credit forms or being a landlord with endless repair bills, the next stage in your property investment journey could therefore be direct investment into the property developments themselves. There are numerous advantages to this route not least potentially higher returns; simplified tax reporting; no more repair bills and endless form filling from banks and credit departments ! We believe the right property development investments have a place in a diversified investment portfolio.
Not everyone is aware of this investment opportunity and it would best suit informed investors or those willing to invest a little time to understand the property development process. It is an illiquid investment, but it can be extremely attractive especially when compared to the alternative investment options available in this era of rising interest rates, falling bond prices and volatile equity markets.
We work closely with a handful of trusted developers with whom we have co-invested over the years
We are focused primarily on UK and Australian property developments working with trusted developers. We concentrate our efforts on locations we know well and we limit the risk by only investing in small-medium sized developments, typically up to twenty apartments in highly sought after locations.
We can team with you and our trusted business partners to make your development ideas a reality if you own land in the UK or Australia which has redevelopment potential
Working with our trusted developers we can work with you from concept to completion:
- determining the optimum strategy for the land/property
- undertaking a feasibility appraisal (will the development make a profit?)
- project management of the planning process
- engaging relevant professionals
- preparing the full planning application
- arranging finance
- negotiate and engage contractors
- project management of construction phase
- arrange marketing and sales
- finalise site works and legals
- coordinate repayment of lenders and investors
Why Invest into UK and Australian Property Developments ?
We are focused on making great investment returns through financial participation in property developments projects in the UK and Australia. We manage risk through the choice of development; location; the developer; and the financials. We directly monitor ongoing projects and are intimately involved with the pre-planning and planning stages prior to final investment in a development project. Spearheaded by Mark Buchan BFP ACA, a UK Chartered Accountant with almost 20 years of property investment experience, largely in a personal capacity. Mark co-invests in all development projects we are involved with.
How can you Invest ?
Mezzanine Lending into the Development
Unless you are a bank, the typical investment opportunity into property development is through mezzanine lending.
Mezzanine lending (second charge behind the bank) provides the ‘shortfall’ in funds between the bank and developer equity finance, typically 25%-30% of the total project costs including land acquisition costs.
Mezzanine lending rates can vary considerably depending on the nature of the project and the size and track record of the developer, say 10%-30%.
As an investor, your funds would be drawn down at completion of land acquisition and repayable at a fixed term on or around completion of the construction. For the size of developments we specialise in that period is in the region of 18 – 24 months.
Equity investment into the Development - post planning approval
For the investor who has a higher risk appetite, it is sometimes possible to take an equity participation after planning permission has been obtained. Once planning permission has been obtained, the overall risk of the project has materially been reduced and it is easier to firm up costs and fix development timelines (hence it is lower risk than equity participation prior to obtaining planning permission).
Obtaining an equity position in the project at this stage would mean taking an equity position after some equity holders have already borne the planning risk (ie the risk and expense of not getting planning permission). As such each equity participation needs to be individually negotiated. There is no one-size fits all model and each investment is bespoke. It’s hard to put a number on the potential returns but probably in the region 30%-50%. We can help identify and facilitate late-stage equity investment opportunities.
Equity Investment into the development - pre planning approval - highest returns and highest risk
For the investor who has the highest risk appetite (looking for the highest possible returns) it is possible to take an equity participation at the very start of a potential project. At this stage there is no guarantee that the project will go ahead and that planning permission will be obtained. The equity investor would be sharing a number of start up costs such as architect fees, planning consultants, professional opinions and reports etc. These costs should be considered equity since they are non recoverable unless (a) planning permission is obtained; (b) the project goes ahead; and (c) the project achieves the required profitability level after reapaying the bank and mezzanine lenders!
Once again each equity participation needs to be individually negotiated. There is no one-size fits all model and each investment is bespoke. On some of the recent development projects in which we have been involved, early stage investment could see returns of up to 100%. We can help identify and facilitate early-stage equity investment opportunities.
Managing your Investment
In addition to investing itself into selected development projects, Spice Developments continues to monitor the mezzanine and/or equity investment, on behalf of all investors. This involves dealing directly with the developer, reviewing on-going financials, site visits, through to project completion. Spice Developments will then oversee final disbursement to the investor.
For the mezzanine lender, the final payment will be according to the interest rate and final tenure of the development. For the equity investor, the final payment will depend on the commercial success of the venture.
To find out more about direct participation in property development click here to be transferred to our Spice Developments website
Alternatively please enter your contact details in the form opposite or reach us on the email below and we will be in touch with you shortly
- invest@spiceadvisory.com
Spice Developments is a division of Spice Capital LLP, which is a member firm of the Spice Advisory network of businesses.