‘BREXIT’ CREATES OPPORTUNITY FOR COMMERCIAL PROPERTY BUYERS
The country is still reeling from the outcome of ‘Brexit’ however whilst there is still widespread uncertainty, there may be opportunities in the commercial property market – especially for cash buyers.
At Peter Lynn & Partners, we have a dedicated commercial property team who have evaluated the options for property developers and have identified a means to raise funds from private investors.
Our approach minimises the costs associated with legal structures and not only enables us to respond quickly but reduces the time you spend identifying and negotiating with prospective investors allowing you to focus on the property and any developments.
Is this approach right for me?
If you are a property contractor or property developer with established investor relationships, this approach may be suitable for you. In addition, if you have previously used SPV or JV structures to fund projects, this approach allows you to work with new contacts and identify new financing options. You can use this approach for leveraged and non-leveraged investments and by purchasing the property without mortgage to begin with, you can move quickly on purchase and remove the delay of dealing with banks.
How it works
Up to 10 investors can participate in the funding of any one SPV and by setting up a UK private limited company as the ‘special purpose vehicle’, the investors can make loans to the SPV that are secured on the underlying property. In this manner, the developer (or its principals) holds A shares in the SPV and the investors hold B shares.
You can select key terms such as the interest rate to be offered to investors, the amount to be co-invested by the developer, the development period, plus other factors however the control provisions are pre-set using documents already in place. These pre-set terms are intended to represent a fair “middle ground” and are accompanied by FAQs for both you as developer and for investors.
The aim of this is to remove the delay between lawyers and to significantly reduce the time you have to spend in approaching multiple investors, because you can present a full package each time.
In summary, the package we are offering will provide the legal foundation for you to confirm investor interest, after which, we can establish the legal structure required to support your project.
What does the package include?
The package will comprise the following legal documents and legal support:
• A written summary to share with prospective investors (with FAQs).
• A template business plan, adaptable to the specific development opportunity
• Incorporation of the SPV company.
• A structure chart providing participants with an overview of how the project works.
• A shareholders agreement for the SPV company, including loan terms and control provision.
• Articles of association for the SPV company.
• Standard development services agreement for the provision of property-related services to the SPV company.
• Standard charging document to secure the loan finance provided by investors.
• Filing of forms with Companies House relating to the appointment of director and the issue of shares on establishment of the SPV company.
• Share certificates for the issue of shares to investors on the establishment of the SPV company.
We also include three 60-minute calls with one of our senior solicitors to discuss any questions you may have as your project progresses.
Cost
The cost for this package is as follows:
• An initial fee of £2,500 plus VAT is payable prior to commencement of work.
• If the project does not proceed (for example, if the required funds are not raised), then no further fee is payable.
• If the project does proceed to raise funds, then a further fee of £2,500 plus VAT is payable or, if higher, 0.5% of the total amount raised with options to defer final payments until completion.
What if a different structure or different terms are required?
The parties can modify the structure and renegotiate the terms if required as we are providing a fair “middle ground” with a focus on funding the projects as quickly as possible whilst reflecting the interests of all parties. Our recommendation is to present the package as a ‘first and final offer’ and if an investor insists on initiating changes, that person covers the associated costs for both sides.
To discuss this opportunity further, please email Darren Lewis on [email protected] or telephone 02920 600799