DIVERSIFICATION
ASSET-BACKED
HIGH-YIELD
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SECURITY TRUSTEE
Structured Investment
Whether you call them Loan Notes or Property Bonds, Main Street Capital’s exciting alternative method for generating returns has seen enormous successes in recent years.
By lending capital to property developers, investors can use structured investments to fund the historically reliable property market – making this a reassuringly familiar way of engaging in alternative investment. Returns on these investments are achieved via interest paid on the original lump sum – and the interest payments can be made quarterly, bi-annually, or yearly.
Alternatively, investors can allow their interest to accumulate during the course of the loan term, in which case it is repaid around the maturity date. This means investors’ returns can take the form of ‘income’ or ‘growth’.
Why Structured investments?
Property remains one of the most popular forms of investing for consumers. Given the returns available in the UK market, structured investments are one of the most attractive options for gaining access to that sector, without requiring any expert knowledge of construction or land development. Indeed, they have become increasingly popular as the attractiveness of buy-to-let investments has diminished due to the significant dilution of the tax advantages in recent years.
Property Developers issue structured investments for planned developments in order to raise funds to buy the necessary land and/or to finance the construction work. In other words, Structured Investments are an alternative source of finance for the developer, as opposed to traditional bank borrowing. They are essentially loans and, as such, Structured Investments are often referred to as ‘loan notes’.
These are usually issued for a fixed term, which is typically set for a period of time that allows the Property Developer to complete the construction and generate a return.
Development properties are bought with investor funds. These properties are registered to and held in special purpose vehicles that have been set up as limited companies. The investors hold security in various ways. Structured Investments hold a charge over these. Details of the security are contained in the Information Memorandum / Security Trust Deed. The Security Trustee holds various security for the investors.
Issuers are able to set their own interest rates and terms of the structured investment. Terms can be found in the issuers' investments memorandum.
