Project Ardent – Maven Capital Partners
Project Ardent is an opportunity to invest in three residential property developments without the hassle and large capital outlay normally associated with direct investment.
The deal is available to Wealth Club investors through Maven Capital Partners, the managers of the well regarded Maven VCTs. £4 million of investor money is sought to help fund the purchase and development of 84 homes in three sites in desirable areas of the Tees Valley, in the North East.
The project targets a base case 1.6x multiple of money return, equivalent to 20.1% IRR, but the manager believes this could be exceeded. Please note, returns are not guaranteed: capital is at risk.
- £4 million equity raise sought for three new residential development sites in the North East
- Two sites secured “off-market” and the other at a significant discount
- 84 residential units planned: 80 private houses and 4 affordable homes
- Experienced North East based property developer
- Base case 1.6x multiple of money return after year three –not guaranteed
- English Partnership structure – very experienced investors only
- Minimum investment £25,000, reserve by 31 October 2017
The project involves the purchase and development of three sites with outline planning consent for 84 residential units: 80 private houses and 4 affordable homes.
All sites are located in desirable villages (Thorpe Thewles, Redmarshall and Middleton St George) in the Tees Valley, an area where demand for quality new build homes is strong.
The sites at Middleton St George and Thorpe Thewles have been acquired “off market”. Redmarshall has been acquired at a significant discount to asking price. The total purchase price is £4,710,000 (£56,071 per plot).
The total development cost is estimated to be £20.2 million. The average selling price of the homes will be around £284,500, which is competitive based on the selling prices of comparable developments in the same areas.
£4 million of Investment is sought alongside senior debt to finance the project, which is jointly promoted by Maven Capital Partners UK LLP and Growth Capital Ventures.
Target return and exit
The base case projection is a development profit of £2.3 million which would drive a return for investors of 1.6x, or 20.1% IRR.
The developer will aim to maximise any opportunity for ‘planning gain’ and increase net saleable floor area. If successful this could enhance development profit to an estimated £3.6 million, and consequently drive higher investor returns. The upside case with enhanced planning is 1.9x or 29.5% IRR.
The downside case for investors is 1.4x or 13.6% IRR.
The term is expected to be up to three years. Final distributions are expected to be made to investors following the sale of the final housing unit.
Please note, the target returns and timeframes are in no way guaranteed. Please see the information memorandum for more details.
Manor View, Redmarshall
Redmarshall is a desirable village situated approximately three miles west of Stockton-on-Tees. The development site has attractive views over open countryside and provides access to a good road network: all major towns and cities in the North East can be reached within 40 minutes.
The site, formerly a care home, has an existing planning consent for the development of 10 executive 4
and 5-bedroom homes. Carlton is in discussion with the local planning authority to enhance the scheme and potentially realise an element of “planning gain”.
Site start is scheduled for Q2 2018 with an estimated 18-month rolling build and sales programme.
The Meadows, Middleton St. George
Middleton St. George is a large village between the market towns of Darlington and Yarm. Carlton has agreed to purchase a 50-unit development site which forms Phase 1 of a larger scheme. Carlton will develop Phase 1 as part of Project Ardent. The wider scheme has outline consent for 200 units.
The site was acquired “off market” at a price of £400,000 per acre. A similar site on the eastern side of the village was recently acquired by competitor developers for £475,000 per acre.
Site start is scheduled for Q2 2018, with an estimated 22-month rolling build and sales programme.
The Paddocks, Thorpe Thewles
Thorpe Thewles is a desirable village situated to the west of Stockton-on-Tees. Similar to nearby Redmarshall, the village has a rural feel but provides easy access to all major towns and cities in the North East.
The site, a former livery, was also acquired “off market” and has outline planning consent for redevelopment for 24 family homes ranging from 3 to 5 bedrooms. There are four affordable homes (2 and 3-bedroom) which will be offered for sale at a discount to open market value. Carlton is in discussion with the local planning authority to enhance the scheme and potentially realise an element of “planning gain”.
Site start is scheduled for Q1 2018, with an estimated 22-month rolling build and sales programme.
Summary Schedule of Homes by number of Bedrooms
|Middleton St. George||–||16||34||–||50|
|As a percentage of the whole project||2.4%||21.4%||53.6%||22.6%||100%|
The developer is Homes by Carlton Limited, an award-winning property developer based in the North East.
The Carlton development team has held senior positions with some of the UK’s leading housebuilders including Taylor Wimpey and Bryant Homes. Collectively it has over 60 years of housebuilding and development experience and has been responsible for the delivery of over 1,000 homes throughout the
North East and Yorkshire. Its track record spans land acquisition, house building, sales and marketing, contracting and property development. The team is also experienced at successfully obtaining improved planning applications and amendments (“planning gain”) which could drive enhanced investor returns.
Carlton will be incentivised to deliver the business plan via a form of profit share, which will only become payable after a priority investor return hurdle of 1.5x multiple of money.
The investment will be structured as an English limited partnership. Prospective investors are invited to participate in the partnership in units of £25,000 and thereby become limited partners.
The sites will be acquired by three new limited companies as special purpose vehicles (SPVs), ultimately owned and controlled by the partnership. The partnership, via the SPVs, will enter into a development management agreement with the developer who will carry out the project.
The relationship between the partners will be governed by the Partnership Agreement.
The partnership has an agreement in principle with Hampshire Trust Bank for a loan of up to £8 million for the anticipated development period. Projected peak drawings under the Base Case scenario are £6.8 million, 45% Loan-to-Cost.
As with any gearing, the debt increases the risk of the project.
There is no direct initial fee payable by investors.
Carlton will receive a development management fee of £27,000 per month and capped at 3.5% of the gross development value. Carlton will also receive 25% of any surplus of pre-tax profits in excess of an investor priority return hurdle of 1.5x. To put this in context, the target base case of 1.6x multiple of money would produce a profit share of £109,088 payable to Carlton on exit. If returns are greater than this, Carlton receives an increased return alongside investors: Carlton is thus incentivised to deliver the business plan although there are no guarantees.
Maven and GCV will receive and share arrangement and structuring fees, fixed annual fees and a performance fee of 7.5% of the total return subject to investors achieving a return of 1.5x multiple of money with a target base case of 1.6x multiple of money (ie the same terms as Carlton).
There are other costs and fees: please see the Information Memorandum for more details.
This is a speculative venture with low liquidity and investors could lose all their capital.
The property and development market could fall for any number of reasons which could reduce returns to investors or may delay the exit until a more favourable market returns.
This opportunity is only for investors who have qualified as Elective Professional Clients of Wealth Club, who have the knowledge and experience to understand the risks.
For details of project-specific risks, please see the Information Memorandum.
How to apply
The offer for Wealth Club clients closes on 10 November 2017. If you are interested you should:
- Carefully read the provider's documents and ensure you are comfortable with the risks
- Reservations must be received by 31 October, with funds required by 10 November
- Complete the application form (subscription agreement and power of attorney) and arrange for these to be witnessed.
Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination. 15 October 2017.
- Maven Capital Partners
- Type of investment
- Residential development opportunity
- Fundraising target
- £4 million
- Target base case return
- Minimum investment
- Reservation deadline
- 30 October 2017