BR Guide FINAL 20 Feb

33 32 BR INVESTMENT OPTIONS BR INVESTMENT OPTIONS GENERAL LENDING This refers to loans that are made to low risk, creditworthy borrowers, usually asset-backed property developers (BR cannot be claimed on companies that mainly deal with securities, stocks or shares or in making and holding investments). The benefits of providing these loans is the low level of ongoing work required after the initial research and analysis, assuming this includes a robust underwriting process. INDUSTRY & INFRASTRUCTURE This is a fairly wide-ranging category which encompasses activities such as forestry, power generation and Private Finance Initiatives. In this sector, a large asset, such as a hospital, is sold by its developer (whose expertise is at the front end of these big projects) to an entity which takes on the efficient management of it to create long-term returns. As a result, significant assets are likely to back the investment, although ongoing input to manage the assets and to generate returns is also likely and this has led to some managers charging higher annual performance fees than are common in other sectors. Managers who specialise in one or two areas are likely to be at a disadvantage in terms of diversification as the projects are large and require a lot of work upfront to set up, but returns should be stable and predictable and the managers will exercise a high level of influence over the underlying projects. Additionally, with a less varied and potentially smaller portfolio, tracking the activities of investees to ensure BR qualification compliance may well be less difficult than for a wide range of companies. Managers are generally looking for low risk assets that can provide predictable income and growth and are non-contentious (so are not securities, buildings, land or making/holding investments). RENEWABLE ENERGY The growth in BR investments into renewable energy is hardly surprising, as the government incentives which underpin them – Feed-in Tariffs (FIT) and Renewable Obligation Certificates (ROC) – are still available, even if they have been removed from the list of qualifying activities for EIS and SEIS. These incentives provide predictable, long-term revenue and whilst some may not be as lucrative as they used to be, they still fit the bill for the type of low risk, moderate returns that managers of estate planning services look to provide. They are also generally asset-backed by land and/ or machinery (such as solar panels), providing collateral. LOAN AMOUNT £1, 954,000 Forecast Sales Value £3,078,300 TERM 18 Months Loan to Value 63.48% ANNUAL INTEREST RATE ON DRAWN LOAN 7.00% Purpose Build 11 apartments in Horsham ARRANGEMENT FEE 1.5% Exit Fee 2% PROPERTY LENDING SITE Mains of Hatton Tai Hen Darracott PURCHASED December 2015 September 2013 December 2014 CAPACITY 2.1 MW 500 kW 2.55 MW EXPECTED ENERGY GENERATION (PER YEAR) 5120 MWh 2000 MWh 5000 MWh NUMBER OF HOMES POWERED 1552 218 1515 WIND ENERGY RENEWABLES Example Investment - Property Lending TIME Investments undertakes this type of investment in its BR service, lending at a Gross Development Value (GDV) of up to 65% or 80% of costs, whichever is lower. Terms are 12 to 24 months. The loans are between £750,000 and £10 million. Finished properties typically have capital values of between £200,000 and £1 million and developers are required to have a demonstrable track record of managing profitable development projects. Example Investment - Commercial Forestry LLP TIME Investments has two forestry investment sites in the UK – Easter Bleaton with 442 acres and Glenglass with 1,182 acres. Both are in Scotland and grow a renewable crop of Sitka Spruce. Example Investment - Wind Energy Renewables There are three sites for wind energy into which TIME Investments has invested. FITs and ROCs are in place to provide a secure 20-year income stream. PROJECT BASED OPPORTUNITIES In these products, investment is made into a Special Purpose Vehicle (SPV) with the intention of establishing and running one or more projects: for example, the development, building and operation of anaerobic digestion projects. SPVs can be beneficial in ring-fencing activities, liabilities and profits and they’re routinely used by renewables projects with secure government backed incomes. A high proportion of investments are now made to project based opportunities as investee companies in this category are usually “asset- rich” – for example, owning renewable energy plant and infrastructures. This makes them less risky due to their high liquidation value, which satisfies the capital preservation objective even in worst case scenarios.