CapitalStackers puts direct property investment within the reach of people who would normally be excluded.
It gives you far greater rewards for lower risk than other types of investment. And while you don’t get the benefit of capital gains, on the plus side, the risk of capital loss is reduced.
We only list deals that we’ve fully assessed and consider to be a suitable Investment. We assess the risks on each project and present them with all the other investor information. Whilst CapitalStackers provides investment information, please note that we are not providing investment advice.
Any fall in property value will first impact on the borrower’s equity. Should it fall further, the CapitalStackers’ fee will be reduced. Only once these items are exhausted is the investors’ cash at risk.
Rising interest rates
Most economists believe that at some time in the not too distant future, interest rates will start to rise from their current historic low levels. The magnitude of any rise is uncertain but the increase in interest payable could adversely affect the borrower's cash flow.
The CapitalStackers due diligence process includes sensitivity of the borrower's cashflow which will include increases in interest payments. These sensitivities are shared in the financial reports.
Capitalstackers Trustees Ltd will procure an independent property valuation before any funds are advanced. Where the senior lender is also seeking an independent valuation an instruction for a joint valuation will be sought.
Financial sensitivities will be run in line with the valuation findings.
Misrepresentation by the borrower
The CapitalStackers due diligence process requires formal meetings with the borrower and an inspection of the property to be funded. A thorough assessment of the proposal, the borrower's background and the source of their equity contribution is checked rigorously against their business plan representations and the senior debt terms and conditions.
CapitalStackers has negotiated a service agreement with Taylors Solicitors (Manchester) who will produce robust, consistent and bespoke documentation for each and every deal.
Where possible, we insist on construction subject to a fixed price, design and build contract although in some cases a construction management solution may be acceptable. In all cases we ensure there’s an acceptable contingency fund in the Borrower's cash flow to cover any unexpected cost overruns (arising from, for example, inclement weather or adverse ground conditions). Where necessary, we seek third party guarantees for additional funds to be injected in the event of a cost overrun.
CapitalStackers will appoint an independent monitoring surveyor (MS) to oversee the progress of a project and produce monthly reports which will be shared with investors via the data room. Reports will specifically comment on progress against budget and the estimated cost to complete the development.
The MS may be appointed jointly with the senior lender.
The MS reports monthly on progress against budgeted timescales and will highlight any delay or potential delay. We remain in constant touch with the borrower throughout the development and keep investors fully informed via the data room.
The failure of the main contractor, sub-contractor(s) or members of the key professional team
Robust due diligence will be undertaken on the contractor, key sub-contractors and key professionals before any funds are advanced. Failure of one of these parties usually results in delays and cost overruns. The impact of such is immediately assessed and shared with investors through the data room and advised by email.
Delay in achieving sales
As part of their initial report, the valuer will provide commentary on the budgeted sales programme and our financial analysis will include a sensitivity of these anticipated timings. Any variances highlighted by the MS will be discussed with the borrower during the development and / or sales process and trigger further sensitivity analysis.
To assess the impact of a potential delay in sales or fall in value, sensitivities on both adverse price and time delays will be included in the initial analysis and presented to investors as a comparison to the base case.
CapitalStackers’ initial analysis of the transaction will consider and report on the strength of key tenants in an investment property / portfolio.
Falling rental values
Relevant sensitivities will be run to assess an investment property’s ability to cope with reduced rental levels.
With multi-let properties and portfolios there is a general expectation that tenants will renew their lease at expiry. Our financial modelling conservatively assumes the majority (if not all) will vacate at lease expiry or earlier lease break. We then use sophisticated software to calculate void periods, void costs and re-letting periods with rental value sensitivities.