Puma Heritage Estate Planning Service

The Puma Heritage Estate Planning Service provides investors with access to private trading companies expected to qualify for Business Property Relief. After two years, the investment should benefit from IHT relief, provided it is still held on death. Tax rules can change and benefits depend on circumstances.

The service is a discretionary managed portfolio that currently invests in Puma Heritage Limited, a specialist property finance business whose lending activities are managed by the Puma Property Finance team – a dedicated division of Puma Investments. 

Puma Heritage Limited is an unquoted trading company that aims to deliver a consistent, but modest, level of return for its shareholders, although this is not guaranteed. 

Puma Heritage has attracted significant interest from investors in recent years. Today, the business has net assets of £135 million. The business has a loan book of 54 loans, spread across a range of property sectors, including student accommodation, hotels, offices and care homes. 

The Puma property finance team has made 509 loans worth £728 million over its 15-year history. To date, it has not lost any capital on its loans, although please note past performance is not a guide to the future and capital is at risk. 

To date, there have been 177 claims for IHT relief following a shareholder’s death – Puma Investments is not aware of any unsuccessful ones.

Important:The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value, so you could get back less than you invest.

Read important documents and apply

Highlights

  • Well resourced property finance team
  • Loans spread across a variety of property sectors
  • Optional life cover that effectively makes the portfolio IHT free from day one (conditions apply)
  • Good BPR claims track record to date
  • Target return 2.5% per annum, not guaranteed
  • Investors can access their money on a monthly basis, on request (not within the first two years if life cover is chosen)
  • Minimum investment £25,000, you can apply online

The manager

Puma Investments is part of the larger Shore Capital Group, an independent investment group established in 1985, and one of the UK’s largest independently owned stockbrokers, employing more than 200 people.

Puma Investments manages £0.9 billion across a range of tax-efficient investments, including VCTs, EIS, and IHT portfolios. Puma Heritage accounts for £135 million and is its single largest retail offering. 

The Puma’s Property Finance division manages the day-to-day lending activities of Puma Heritage Ltd, providing development loans to finance residential, commercial and specialist sector projects such as hotels, student accommodation and healthcare, including care homes and retirement living. The division is headed up by David Kaye, CEO of Puma Investments. David is supported by a team of 17, which consists of dedicated lending, operational, and legal teams and senior advisers. Since making its first loan in 2005, the Puma Property Finance team has completed £728 million of property loans and construction projects. 

To date, the team has not lost any capital on any of the loans it has made, including those made during the global financial crisis. Please note, past performance is not a guide to the future and capital is at risk.

The custodian for this service is Pershing Securities Limited, which will hold your shares on your behalf.

The optional life cover policy is provided by Beazley Syndicate 3622.

Investment strategy

The Puma Heritage Estate Planning Service is a discretionary portfolio service that provides investors with access to private trading businesses that qualify for Business Property Relief. The service currently invests into Puma Heritage Limited. Puma Heritage is a property finance business, whose activities are expected to qualify for Business Property Relief. 

Puma Heritage Limited provides loans of £5 million to £35 million to professional property developers across three core loan products:

  1. Pre-development senior bridge finance
  2. Development loans
  3. Post-development exit finance

Puma expects approximately 80% of its loan book to consist of development loans, with the balance split between pre and post-development loans.  

Pre-development senior bridge finance 

This is offered to developers who apply to enhance the planning permission they have already received, prior to starting development. These loans are made for up to 18 months, and Puma Heritage offers interest rates from 0.65% per calendar month. 

Development loans 

These loans are offered to develop properties across a range of sectors, including residential, student accommodation, hotels, industrial, offices, and healthcare. The maximum loan term is 30 months, the maximum loan to gross development value is 70%. Each loan has first charge security on the underlying property and the borrower vehicle. Puma Heritage offers interest rates from 8% per annum.

Post-development exit finance  

This is offered to experienced developers wishing to refinance development funding on practical completion whilst a property is marketed for sale. These loans are made for up to 18 months. Loans of up to 75% of gross development value are considered. Puma Heritage offers interest rates from 0.65% per calendar month. 

Risk management

The Puma Property Finance team adopts a cautious approach aimed at protecting capital and based on disciplined lending criteria. It will only lend on a first-charge basis and avoid projects where the loan to gross development value exceeds 75%. The average loan-to-value (“LTV”) of the Puma Heritage loan book currently stands at 63%, which Puma believes to be conservative. This leaves an equity cushion to protect Puma Heritage’s capital, should a borrower default on its loan. 

The team may put additional security in place, depending on the circumstances, including: 

  • Cost overrun guarantee – to cover any cost overruns during the development
  • Capital and/or interest guarantee – to cover capital and/or interest should Puma Heritage be unable to recover the full cost of a loan by selling assets
  • Performance Bond – to protect the developer from any contractors failing to fulfil their contractual duties, typically due to financial difficulties
  • Pre-agreed sale – on occasion the developer may have pre-sold the asset(s) prior to developing them, thus reducing risk to Puma Heritage

In addition to seeking adequate security and guarantees, the team runs scenario stress tests to understand how resilient each loan might be to an adverse economic shock. 

Target return

The service targets a minimum return of 2.5% per annum after fees and charges over the holding period – not guaranteed.

The annual management fee is deferred until the investment is sold, or five years if earlier. This should allow capital to accumulate and provide a buffer in the event of weaker performance. The management fee is payable only if investors achieve a minimum 2.5% return per annum before fees. 

Impact of IHT on investment returns

The table below shows illustrative returns for a £100,000 investment over 5, 10 and 15 years, with and without IHT relief.

As the table shows, a 2.5% return per annum (after fees) compares favourably to higher returns once the IHT relief is taken into account. Remember, tax rules can change and benefits depend on circumstances. Eligibility for IHT relief is only assessed at the point of death.

  With IHT relief Without IHT relief (subject to 40% IHT)
Illustrative net return 2.5% 2.5% 5% 7%
5 years £109,747 £67,884 £76,577 £84,153
10 years £124,168 £76,805 £97,734 £118,029
15 years £140,485 £86,898 £124,736 £165,542

The illustration with IHT relief shown above also includes the impact of the initial fee, dealing fee, and the Wealth Club discount applied to this offer, whereas the comparisons with other returns subject to IHT assume no initial charges. Note, this is not an illustration for the Puma Heritage Estate Planning Service: please contact us for your personal illustration.

Current assets overview

Puma Heritage’s loan book currently contains 54 loans , of which 21 are live development projects. The loan book is concentrated, with £91.4 million (equivalent to 67.7% of current net assets) deployed in the top 10 loans.

The loan book is spread across a range of property sectors. Due to the short-term focus of Puma’s loan book, the sector breakdown and top 10 exposure are likely to change frequently as loans mature and others are added to the portfolio.

Source: Puma Investments as at 31 March 2021.

Examples of assets by type

Pre-development finance – Puma HeritagePre-development senior bridge finance – previous example

Puma Heritage participated in a pre-development bridge loan of £3 million to finance the acquisition of a property in Glasgow to be developed as a 96-bed hotel. The team found the loan attractive for several reasons: the developer had 20 years’ experience, the property benefits from a good location in Glasgow’s central business district and is expected to form part of a multi-site boutique hotel concept in affluent university cities. 

Development loan – Puma HeritageDevelopment loans – previous example

Puma Heritage provided a £16 million development loan to fund the development of a 252-bed purpose-built student accommodation property in Colchester. The loan was attractive to Puma for several reasons: the developer has over 20 years’ experience and an extensive track record in developing and managing student accommodation assets, the loan has first charge security on the assets, and once complete, student accommodation properties are typically attractive to institutional and overseas investors.

Post-development loan – Puma HeritagePost-development exit finance – previous example

Puma Heritage provided £11 million post-development exit finance to support the developer of two new care homes in Merseyside during the initial operational phase. Jointly comprising 160 beds, the care homes provide high-quality residential, including dementia and special needs, care.

Example of a default

Whilst there has not been any loss of capital to date, there have been situations where borrowers have defaulted and the Puma Property Finance team has had to intervene to protect Puma Heritage’s capital.

An example is a £5.3 million loan in which Puma Heritage participated to finance the development of a care home in Surrey in 2016. The loan was underwritten at a 54% LTV and in addition to the standard first charge, Puma insisted on a £435k cash deposit by the borrower in a blocked account to cover potential cost overruns. During the construction, the main contractor fell into financial difficulty and ultimately went into administration. The loan was then technically in default. As first-charge holder, Puma was in control and worked with the borrower to appoint a new contractor. The costs to complete increased as a result and Puma agreed on a facility amendment with the borrower that required an additional cash equity contribution of £820k. The project eventually completed and Heritage was repaid in full in 2019.

Performance 

The performance track record of Puma Heritage dates back to November 2013. Since launching, the business has been successful in attracting capital, with assets growing year on year. 

This means the business is able to achieve greater diversification as well as offering loans to higher-quality professional borrowers operating within the £10-20 million loan size market. In addition, operating costs can be spread across a larger pool of loans – potentially enhancing shareholder returns.

Since November 2013, Puma Heritage’s growth shares have achieved a return of 21.4%, equivalent to 2.6% per annum (May 2021). Investors should note returns in the early years were held back by the company’s small size and the disproportionate impact of fixed operating costs. Over the last five years to May 2021, returns have averaged 3.4% per annum – note past performance is not a guide to the future.

Source: Puma Investments. Performance data shown is net of all ongoing charges. Please note these are unquoted companies and the share price is based on Puma’s own valuation. Remember, these investments are illiquid and can be difficult to sell and value. Past performance is not a guide to the future.
The performance data shows Puma Heritage’s share price only, which includes the annual management charges accrued by investors. It does not take into account initial or dealing fees. Performance is calculated based on the allotment price for Puma Heritage shares on a monthly basis between 29 November 2013 – 31 May 2021. Past performance is not a guide to the future.

Life cover 

The service offers an optional life cover, which promises a payout equivalent to 40% of the original investment (i.e. the amount that could be subject to IHT), should the investor die in the first two years – subject to terms and conditions.

To benefit from the optional life cover, investors pay an extra 3.5% in annual charges for the first two years. 

To be eligible, investors need to be under 90 years and 3 months when they invest and confirm a few health details. The maximum insurance payout per individual is £300,000 (40% of a £750,000 investment). Please carefully check the full terms of the life cover, including the exclusions set out in the application form and the investor agreement before applying. For instance, the policy has an exclusion for claims relating to Covid-19.

Access to your investment 

Investors can request to redeem some or all of their shares by giving written notice at least 30 days in advance. 

In certain exceptional circumstances, such as a change of tax rules, share sales can take significantly longer and the timing of share sales and return of your remaining capital cannot be guaranteed. You should not invest in Puma Heritage Limited unless you are able to accept that – in exceptional circumstances – it could take a year or longer to access your investment following a withdrawal request.

The life cover will be reduced or terminated should you make a withdrawal within the first two years of the investment.

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.

The IHT service contains assets which are high risk and should only form part of a balanced portfolio, you should not invest money you cannot afford to lose. The service invests in illiquid assets which may be hard to sell or value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

Tax rules can change and benefits depend on circumstances. Eligibility for BPR is assessed at the date of death and will depend on the companies in the portfolio remaining qualifying. Broadly speaking, you will need to have held a BPR qualifying stock for at least two years and still hold it on death to qualify. 

177 investors have passed away since the service launched, in every one of these cases, their investments have qualified for business property relief where the investor died after two years.

Treasury review

A previous Chancellor requested a review of IHT to simplify the tax system. A report was published in July 2019, but this has not yet led to any rule changes. Please remember, tax rules can and do change and benefits depend on circumstances.

Charges 

A summary of the main charges and savings is shown below – not including the charges for life cover. The investment may have additional charges and expenses: please see the provider documents for more details. If you would like a full breakdown or a personal illustration, please let us know. Please note, as Fern has few employees in managerial positions, management functions are typically performed by Octopus Investments, hence the annual investee company management charge. 

Investor charges
Full initial charge 4%
Wealth Club initial saving 2%
Net initial charge through Wealth Club 2%
Annual management charge 1.5%
Administration charge
Dealing fee 1%
Performance fee
Exit fee
Investee company charges
Initial charge
Annual charges 1.8%
All fees and charges are stated exclusive of VAT, which may be applicable in some cases.

See example of the total charges over 5 years

Our view

The Puma Heritage Estate Planning Service provides investors with the opportunity to back a highly regarded specialist property lending team with a strong longer-term track record. The Puma Property Finance team has made over £700 million of loans since it was established in 2005, and it has yet to see any capital losses. This is a record the team will be keen to protect. Note, property lending is not without risk, part performance is not a guide to the future. 

In our view, in recent years Puma Heritage has matured. Its loan book has grown from £11.2 million in 2015 to £135 million today. By attracting new assets, Puma Heritage should be able to spread its operating costs as they are shared across a larger pool of loans. What’s more, the business has been able to use its greater size to increase diversification and lend to higher quality professional borrowers, who require greater amounts of capital.

For experienced investors concerned about the potential impact of inheritance tax on their estate, this service could be a compelling consideration. The service may also provide additional diversification to a large estate planning portfolio or be of interest to those looking for a service that can potentially offer BPR replacement relief. Investors should form their own view. 

Read important documents and apply

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision 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.

The details

Sector
Lending
Portfolio size
£135.0 million
Initial charge
4.0%
Saving via Wealth Club
2.0%
Net initial charge
2.0%
AMC
1.5%
Last updated: 16 July 2021

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