Although all our investments undergo rigorous due diligence, investing with Propio does still carry risk. As an investor, you are subject to the risks associated with owning or financing a property directly. There are also additional risks related to delegating decision making and inability to control when you will exit your investment.
We recommend that our investors diversify their capital across multiple investment types, strategies and locations to reduce the concentration risk associated with exposure to and one property investment. You can read more about diversification of your portfolio here.
Past performance is not an indication of future performance and investors should be aware that any stated projected returns are guidelines and are not guaranteed.
Below is a non-exhaustive list of the key risks associated with investing through Propio:
You may lose some or all of the principal capital you initially invest. This could be due to a number of reasons depending on the investment strategy, such as: a fall in the underlying value of the property asset(s), an unforeseen problem with a property development leading to an increase in the total project cost, a downturn in the UK economy and/or property market, or multiple downstream borrowers defaulting on their loans.
Propio investments are illiquid, and you must be prepared to hold the investment until maturity. Although early exits are possible, this will depend on finding another investor to buy your investment from you at the prevailing market rate. If you exit early, it is highly likely that you will not receive the full returns set out at the start of the investment and you will need to pay for any costs incurred in the transfer. There is no liquid secondary market for these investments and so there can be no guarantee of the ability to sell.
Dividends from income producing property or interest from bonds are not guaranteed. For example, lower than expected rents may be agreed on a property, leading to a lower rental dividend, or a property may be sold at a lower value than initially expected thus affecting the coupon of the related bond. While the developer is obliged to pay the initially agreed upon coupon payment, a renegotiation may occur to reduce this coupon if Propio deems it necessary.
Some of Propio’s (Invest with Prop Ltd) shareholders are also shareholders in our investment providers. Whilst we recognise there could be a conflict of interest between these investment providers and Propio, we have set up robust investment assessment processes and Chinese walls to ensure that preferential treatment is not given to these investment providers and they are treated in the same manner as any other.
After the 14-day cooling off period is over, you cannot cancel your investment and you must be prepared to hold the investment until maturity.
In the event that market conditions at the time of maturity of the investment are poor, a decision may be taken as to whether to extend the investment duration. This decision would be taken jointly by Propio and the specific investment provider, with the aim of avoiding a property resale value substantially lower than the initial purchase price. Conversely, an investment may also be sold before maturity if this accelerated sale is deemed by Propio to be in the best interest of all shareholders.
Changes in law (including tax law) may affect the property and/ or the investment in a way that reduces the value of the property and/ or the investment. These changes are beyond Propio’s control.
Once your funds reach Propio, they are not covered by the Financial Services Compensation Scheme meaning that you cannot claim compensation if your investment does not perform as forecast.
As an equity holder, you have no control over decisions made concerning an investment during its lifecycle. This means that Propio can make decisions on investors’ behalf concerning an equity investment, including but not limited to: timing of a sale, final sale price, and alterations to the property. As a bondholder, you have no voting rights over an investment.
There is a possibility that an investment provider will not be able to sell or refinance part or all of a development or investment asset funded by Propio. This could be for a number of reasons, including but not limited to: a change in economic conditions, unforeseen legal or environmental issues, or a lack of demand for the property. This may result in additional costs or a reduction in the investment value and a potential loss of capital.
The lack of clarity and general uncertainty regarding the UK’s exit from the EU is likely to increase market volatility and may impact buyer and investor confidence in the UK property market. This may adversely affect the timing and level of resale values.