Frequently Asked Questions
What return does the Fund provide to investors?
The fund is designed to provide an investor with a gross return of 9.1% per annum. This is return is distributed on 13th February, 14th May, 14th August, 14th November.
The income can be paid quarterly or if rolled up into the fund the equivalent A.E.R. will be 9.42%.
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Are there any initial deductions (fees) from my investment in the Fund?
No. If for example an investor invests £100,000, they receive £100,000 worth of units in the Fund. There are no fees deducted from the initial investment amount. back to top
How does the pricing for units in the Fund work?
Your investment remains the same. For example, if you invest £100,000 then your investment amount will remain the same, any gain is not subject to capital gains tax but income tax at your marginal rate is charged on distributions. back to top
What if I invest during a quarter, will I be paid interest for being invested for part of the relevant quarter?
Yes. Your income return is based on the day in which you are accepted as an investor into the Fund, and the income is calculated on a daily basis for any part-quarter that you are invested. back to top
Do I need to take cash income from the Fund each quarter?
No. As an investor in the Fund you can elect to be paid your quarterly income payment, or you can elect to have your investment accumulate for the relevant income payment to buy additional participation in the fund. There are no initial charges or redemption charges on the increases in your fund holdings by increasing your participation in the Fund in this way you will increase the income amount received each quarter. back to top
Can I redeem my investment?
Yes. The Fund has two redemption dates every year 30th April and 31st October. You may redeem your investment in part or in full. You are required to provide 2 months’ notice (and to have been invested for a minimum commitment period of 5 months). The General Partner has discretion to defer redemptions if the redemption amount exceeds 10% of the fund value to protect the interest to existing investors. The Business Lending Secured Income Fund is designed to provide a medium term secured income return that far exceeds cash or standard bond rates. So whilst the encashment option is provided to allow access to funds you should consider the investment as part of your medium to longer term investment strategy. back to top
Are there any redemption fees or penalties?
Yes. As noted above the Business Lending Secured Income Fund is designed to be a medium to longer term secured investment and therefore if you surrender your investment (or part thereof) within 5 years there is a redemption fee of 3% applied. After 5 years of holding the investment no redemption fees will be applied. back to top
Can an IFA enhance returns by waiving commission?
Yes. An IFA may give up initial commission on a 1 for 1 basis to increase the allocation rate, (which is set at 100%) or may give up trail commission which will affect the income rate paid. This is done on a matched basis. I.e. If an IFA gives up 0.5% trail commission per annum the income return to the investor will be enhanced by 0.5% per annum. back to top
Are there any investment limits on the investment size for an investor in the Fund?
The Fund requires investors to make and maintain a minimum investment of £25,000; and there is a maximum investment per investor of £2M. However larger sums may be possible subject to the discretion of the Fund Management. back to top
Is the Fund open to SIPP investors?
Yes. An exempt unit trust feeder has been set up to accept money into the fund from Pension providers and Charities. There are various SIPP providers that have already approved the Fund as a permissible investment. If you have a particular SIPP provider that you would like to access the Fund through, please contact Park Caledonia Capital Ltd to see if the Fund is already accepted with that provider or if not they will help you through the process of having it accepted. back to top
Who is managing the Fund’s Assets?
The General Partner to the Fund is Business Lending Secured Income GP Limited who is advised by Business Lending Fund Management Limited. Business Lending Fund Management Limited is as specialist property development finance group headquartered in London. The group is owned and managed by a highly experience team of bankers, further information about the group is available at www.blsifund.co.uk you may also contact the Fund Operator, Park Caledonia Capital see www.parkcaledonia.co.uk or the Fund Marketing Partners Capital Platform info@capitalplatform.co.uk back to top
Why invest in Development Finance?
Project lending to house builders and developers is a specialist lending sector. Careful origination, underwriting and project management can provide high returns within a secured risk managed environment. back to top
What Security Does the Fund have for its Investments?
The primary security for any loan made by the Fund is a legal mortgage drafted and registered by lawyers acting on instruction from and reporting to the Fund. The Fund’s advisors will also require other security relevant to each individual transaction but typically these will include guarantees from the developers, floating charges, assignment of construction contracts and warranties from architects and construction engineers. back to top
Within what Geographical Area will the Fund Lend?
The initial focus of the Fund will be on development projects in London and southern England as within these areas the housing market has generally stabilised and the local and regional employment dynamics are less dependent on public spending. In due course the Fund will expand its lending activities to a wider area of the UK but focusing always on areas where there is a stable and liquid market for new homes. back to top
How Secure are the Loans?
No lending is risk free but the asset management team for the Business Lending Secured Income Fund have a series of selection, underwriting requirements and due diligence process that are undertaken prior to any advance which are followed up with careful post drawdown project monitoring. A more fulsome schedule of the underwriting criteria is detailed within the investment memorandum; the following represent only some of the main touch points:
- Development borrowers must be experienced in building and developing projects similar to any scheme to that proposed.
- Many borrowers are well known to the Business Lending Team and will have successfully completed development projects previously.
- Capital advances are made to a maximum of 70% of the development value.
- The Fund benefits from legal charges over the property assets and other security applicable to the transaction.
- All sites are visited by the Business Lending Team both before the loan is granted and then as part of the regular monitoring.
- Construction costs and property values are checked by surveyors reporting to the Fund.
- Construction and sale of the projects are carefully monitored by not only the Business Lending Team but also a monitoring surveyor appointed to report to the Fund.
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I have read that the Irish Banks were big lenders to the property development and are now in trouble – Why can BLSI succeed where they failed?
As noted above, project lending to house builders and developers is a specialist lending sector. It requires an experienced and well focused management team. It is also a cyclical business.
The Business Lending management team are a very experienced team of banking professionals and have been lending to the development sector for many years. They have also experienced the property cycles from the low point in 1992 to its peak in 2007 and in part experienced the previous cycle from the lows of the 1973/4 secondary banking crises to the highs of the late 1980’s boom.
In the opinion of the asset management team the UK housing market is at the beginning of one of its regular 15 year cycles.
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Yes but what happens if House Prices do Fall again?
In the opinion of the asset management team they are likely to be in the doldrums through 2011 before picking up in 2012 and beyond. But development funding, whilst related to the housing market, is not directly correlated. It is therefore possible to make good quality secure returns in the development market even in a flat or falling housing market. back to top
How So?
The fund has a policy of making capital advances to a maximum of 70% of the value of a development. The developer is required to have an equity stake subordinated to the Fund’s loan and the development project must accord to minimum profitability requirements. In simple terms house prices would have to fall by around 25-30% for the Fund’s capital investment to be at risk.
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If it was that easy why did the Irish Banks get it so wrong?
Initially they didn’t! The Irish banks anticipated the start of the last property cycle very well and from 1994/5 to 2002/3 were very successful lenders to the UK residential development funding market. They did however get carried away and expanded heavily into commercial property development where the disciplines are very different.
The fundamentals of the UK housing market are such that on no recognised measure are we building enough new homes. However many would argue we already have plenty of shops and offices!
The Business Lending Secured Income Fund is solely focused on residential development. We do NOT finance “stand alone” commercial developments and will only engage in any form of commercial property development where it is minor or ancillary to the primary residential development scheme. back to top
Can the high return levels on development finance be sustained?
The forecasted rates of return are not specifically a sign of the current times. Project finance to the residential development market has typically been a more costly form of finance. Its not that the current returns are unsustainably high, it was that for the 2-3 years before the credit crunch rates were unsustainably low! back to top
Important notice - This webpage is designed solely for investment professionals as defined in the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001. The content of this webpage should not be relied upon by, disclosed to, or circulated to, private investors. This webpage does not represent an offer for subscription.
The investments described are unregulated collective investment schemes as defined by the FSMA. The Schemes have not been authorised or otherwise approved by the FSA and, as unregulated collective investment schemes, cannot be marketed in the UK to the general public.
The Information Memorandums give information relating to the fund, and should be read and understood prior to any investment being made.