Hassle-free property investing

Share Investors buy shares in a property, entitling them to a share of net rental income and exposure to property price changes when the property is sold.

Loan Investors provide a portion of a secured loan against a property. Interest accrues daily and is usually paid monthly during the term of the investment. Investors receive their capital back once the loan matures and/or the property is sold.

British Pearl enables people to invest in buy to let and development projects, as either shareholders, lenders, or both.

We source and manage all our properties, taking the pain out of property investing and management. Our robust, easy-to-use platform gives you access to an exciting market, plus flexibility and control over your investment.

We can’t guarantee what your earnings will be. Each of our properties has a unique share and loan return, based on a number of factors including loan-to-value. For our latest returns, check out our site.

With a British Pearl ISA, you can invest savings of up to £20,000 p.a. and transfer your existing ISAs tax free in loans secured against UK property. Just like a bank providing a mortgage, your capital is secured with a first charge.

At the moment, it’s only available for our loan investments.

Find out more about our IFISA.

Capital at risk. No FSCS on invested sums. Tax treatment depends on individual circumstances and may change. Before investing read more

Yes. Just because it’s a property investment doesn’t mean it has to be illiquid. If you need to access your money before you investment matures, you can sell your loans or shares on to other investors in the Resale Market. This is subject to demand and fees.

Each British Pearl property investment is owned by a limited company referred to as a Special Purpose Vehicle (SPV) as they are incorporated for the special purpose of buying and selling own real estate.

Our role is to source and manage the property held in the SPVs, facilitate investment in them via our Platform and distribute returns to both Loan and Share Investors.

As a Loan Investor you provide a secured loan to the SPV which holds your chosen property investment. The SPV, incorporated and managed by British Pearl, is the borrower and the loan is registered as a first charge against the properties held within it.

This model means that our Loan Investors are only exposed to the credit/counterparty risk of the SPV which they lend to. Unlike traditional P2P arrangements, the borrower is not an independent third party. This gives British Pearl visibility and control, including the ability to intervene at an early stage should any issues arise.

The following details are common to all our borrowers:

• Restricted borrowers
  No loans are made to individuals or businesses other than the SPVs incorporated and managed by British Pearl.
• Incorporation information
  All the SPVs are incorporated in England and Wales and registered with Companies House for the sole purpose of buying and selling own real estate.
• Shareholders
  The shareholders are the investment’s Share Investors. No shareholder can hold more than 24.9% of an SPV’s share capital.
• Management
  All of the SPVs are managed by British Pearl as investment manager.
• Documentation
  Loan and management documentation is standardised across the SPVs and is available once you have been accepted onto the platform.

Our model means that a credit risk assessment of the SPVs themselves is of limited value (the SPV generally only holds the investment property, an amount of cash and the liability of the Loan Investor capital). As the loan is secured, the risk assessment is performed at the property level.

See the next tab for an overview of our Property Acquisition Process. For details of specific property investments, please refer to the individual Info Packs.

Two key drivers for assessing risk is how the property is secured and the loan-to-value ratio (LTV)

Security and charge

All loans are secured with a first charge (as with a bank mortgage) against the property held within each SPV. Loans secured with a first charge are first in line to be repaid upon any sale (after fees and any SHIELD borrowing that may be due) before Share Investors.

The loan security is held by British Pearl Trustees Limited (‘the Trustees’) on behalf of the Loan Investors. The agreement between the SPV and the Trustees which secures the loans (legal charge) is registered at HM Land Registry and at Companies House. Should the SPV default on the loan, then the Trustees on behalf of the Loan Investors will have the right to take the monies from the sale of the property.

The loan-to-value ratio

The loan-to-value (LTV) is a measure of how large the loan is in relation to the value of the underlying property against which the loan is secured.

Total amount of loan X 100 = loan-to-valueValue of property

Currently our LTVs range from 50-70% which are conservative. An LTV of 70% means that the property would need to fall in value by more than 30% before the loan amount (excluding fees) could no longer be covered by the value of the security.

Simplified Example:

British Pearl purchases a property for £1,000,000 plus £100,000 in fees such as Stamp Duty giving a total cost of £1,100,000. If the LTV is fixed at 65%. This means that there is £450,000 of equity and £650,000 of debt.

If the property value fell 25% to £750,000 there would be enough money from the proceeds of sale to repay the loan. If the property value fell by 40% to £600,000 there would not be enough money from the proceeds of sale to fully repay the loan.

Note that this example does not take into account any sale costs that would be incurred.

We use the LTV as a basis to categorise loan risk into the following bands:

Our expert team sources all properties and carries out thorough due diligence in respect of deal structure, legal matters, and investment analysis. The Investment Policy is reviewed periodically in light of customer demand and economic outlook and is approved by the British Pearl Board

1. Sourcing within Investment Policy criteriaWe assess a wide range of opportunities nationally. Our internal valuation process is thorough and takes into account many factors including the HPI for the area, the local economy, infrastructure and transport links as well as relevant market comparables. Shortlisted properties are modelled over a full investment horizon in order to give us Share Investor income and capital outlook while ensuring Loan Investor needs can be met.
2. Investment analysisThe Investment Team models the share and loan investment strategies over the investment horizon including a review of: validating input variables, flexing the forecast assumptions, assessing alternative capital structures, time horizons and pricing models. If the property has potential then an Investment Proposal is made to the Investment Committee.
3. Due DiligenceThe Investment and Property Teams carry out due diligence on all potential property purchases which includes: review of legal documentation (e.g. covering planning, titles, rights of way, auction pack), external inspection, and internal inspection (mandatory before offer becomes formal).A formal valuation will be undertaken by a Royal Institute of Chartered Surveyors (“RICS”) chartered surveyor.
4. Investment Committee ReviewThe Investment Committee comprises members of the Executive Committee and Board. The Committee is responsible for assessing the investment proposal from the perspective of potential Share and Loan Investors.
5. OfferIf the investment fulfills all of our criteria and our offer is accepted, then it will be acquired using an underwriting vehicle. By pre-purchasing, British Pearl takes on the completion risk. The conveyance is carried out independently of British Pearl as an additional layer of due diligence.

Monitoring

Once an investment property has been purchased and is made available as an investment on the platform, it is monitored on a regular basis to establish:

• that it is performing in line with expectations,
• whether the economic backdrop has changed, or
• whether the property itself has faced a changing situation.

Once an investment is fully sold in the New Sale market and opened up into the Resale market we publish quarterly valuation updates mapped to the Land Registry HPI at the local level plus an independent RICS valuation (either onsite or desktop) once a year.

British Pearl sources the investment property, manages the SPVs which holds the property and facilitates investment by both Share and Loan Investors. Before launching a new investment to the Platform, we decide on the SPV’s capital structure. That is, the balance between shares and loans which is a key driver in determining the risk profile of the investment and interest paid on the loans.

We structure the balance between the shares and the loans to offer various different return and risk profiles to our investors. The loan interest rate is calculated and fixed at that point in time to reflect the two key drivers of risk in the loan investments. They are:

1. Investment term: the longer the initial period of the loan then the higher the interest rate that is offered to the investors since the funds are tied up for longer.
2. Loan-to-value (‘LTV’): the higher the LTV then the higher the interest rate that is offered to the investors since the equity buffer that is in place is smaller.

Our interest rates are broadly in line with interest-only mortgage rates for a similar Investment term at the start of the investment and are fixed for the duration of the investment.

Loan Investors have a high level of protection for two key reasons.

1. All loans hold a first charge against the investment property held within their individual SPVs. This is where an ordinary bank mortgage would normally be ranked and means that Loan Investors are first in line to be paid out by the SPV.
2. They all have a loan-to-value (‘LTV’) at the point of purchase of between 50% and 70%. This measures how large the loan is in relation to the value of the underlying asset that forms the security for the loan capital (see tab How do we assess risk?). An LTV of 60% it means that the underlying investment property would have to lose around 40% (excluding fees) of its value before the Loan investor faces capital risk.

This means that under normal circumstances and on an on-going basis all active loan investments have an indicative loan price of £1 per £1 unit of principal. If there was a material change in the financial position or outlook for any investment then this position would be revisited in an appropriate and timely fashion.

If available, Loan Investors are free to list their loan holdings for sale (offers) at any price they wish on the Resale market. In the same way, potential Loan investors can list their loan buying intentions (bids) at any price they wish.

Despite a rigorous investment assessment process there is no guarantee that an investment will perform and it is possible that temporary issues may mean that interest is not paid on time.

British Pearl’s Property Management Team oversee the management of all our investment properties and are responsible for ensuring that properties are tenanted with minimal void periods and that operational expenditure is closely monitored. See tab SPV Reserves and SHIELD for details for how we manage short-term cash flow issues.

The SPVs are contractually obligated to pay interest to Loan Investors. If a payment is missed the unpaid loan interest would roll over (accrue) to the next payment date. Loan Investors are entitled to receive interest until the redemption of their principal loan amount.

Sustained tenancy issues will affect income and so impact both Share and Loan Investors. Ultimately Share Investors may not receive dividends and Loan Investors may not receive interest payments (although interest always continues to accrue).

Such circumstances will only be sustainable for a limited period before we would have to consider selling the property. On sale, Loan Investors will be entitled to receive accrued interest plus return of the principal loan amount ahead of, and at the expense of, any payment to Share Investors. Conversely, Loan Investors will not share in any capital appreciation.

Repayment of the loan principal and any accrued interest is not guaranteed. It is dependent on the property not depreciating significantly in value at sale. It is important, that potential Loan Investors thoroughly review the Info Packs and LTVs to understand the risks of lending.

SPV Reserves and SHIELD

Each SPV maintains its own cashflow pot - referred to as the SPV Reserve - to ensure that it is in a position to meet its liabilities such as void periods and unexpected maintenance costs (e.g boiler replacement).

British Pearl also offers a short-term loan facility called ‘SHIELD’, should an SPV experience a negative cash flow event after the SPV Reserve has been fully utilised. SHIELD is funded directly from British Pearl revenues and can be deployed to any SPV, unlike the SPV Reserve which is property specific. All SHIELD funds used must be repaid by the SPV.

Both the SPV Reserves and SHIELD provide temporary liquidity to help good investments that have unfortunately been hit with unforeseen negative cash flow. Neither are Contingency Funds as defined by the FCA: arrangements used for the purpose of making payments to a lender when a borrower does not meet its obligations under a P2P agreement.

While interest payments may be made from the SPV Reserves or SHIELD, the decision would be made at the sole discretion of British Pearl. Neither liquidity support provides a guarantee that interest or principal payments will be made and Loan Investors should not rely on them to do so.

Both of our share and loan investments such should be viewed as longer-term investments in line with the Info Packs that are published for each offering.

We understand there may be times when people need to access their invested funds. Therefore we created a source of liquidity through our secure and automated Resale Market which is activated once the property has been fully sold in the New Sale market.

Here, Loan Investors can list all or some of their loans for sale stating a preferred price. The Resale Market will automatically match you to a willing buyer. There is a 0.5% loan sellers fee. Sales will depend on matching and we cannot guarantee that Loan Investors will be able to sell at their preferred quantities, prices or times.. This could mean selling at less than £100 nominal paid in the New Sale Market.

For details on how the Resale Market works please see the Resale Market FAQs.

Each property investment is owned by a special purpose vehicle (“SPV”), which is a UK Limited Company incorporated for the “special purpose” of buying property. This is done so that each property investment is held completely separately from every other and also from British Pearl (the business that operates the investment platform).

An additional layer of protection is provided by the structure of British Pearl Group. Various functions have been kept separate by incorporating distinct legal entities for each, out of reach of any potential creditors of British Pearl, including estate management and the security trustee whose role is to hold the charged property on behalf of Loan Investors.

In the event of British Pearl suffering financial difficulties, the British Pearl Board will trigger our wind down plan. The purpose of the plan is to ensure a timely and orderly wind down of our activities with a view to mitigating impact on investors prior to British Pearl ceasing trading.

All cash (but not investments) held either in your main or ISA accounts is designated as client money. This means, your funds are held in trust in a segregated bank account. Client money is kept separate to British Pearl’s funds and is protected by the Financial Services Compensation Scheme, up to a personal limit of £85,000.

Valued Added Tax (VAT) is payable on the Resale Market fees, only. All other Loan Investor fees are exempt from VAT.

Income Tax: Interest is paid gross, without income tax deducted.

• Basic rate tax payers are entitled to a ‘Personal Savings Allowance’ of £1,000. This is reduced to £500 for Higher Rate Tax Payers and nil for Additional Rate Tax Payers.
• Where an overseas investor can take advantage of the terms of a Double Taxation Agreement, they may have to make a claim for relief under that Agreement before any payment is made.
• Corporation Tax: Withholding tax will not be applied to interest income paid to Loan Investors who are UK corporates. Instead, interest income must be accounted for in the company accounts and the income is taxed on an accruals basis and Corporation Tax may be payable, subject to the company’s overall profitability.
• Where the Loan Investor is an overseas corporate, 20% withholding tax will be applicable on interest income unless the corporation is a bank or the overseas company has a permanent establishment in the UK and the interest forms part of the taxable income of that permanent establishment. The level of withholding tax can be reduced by making a claim under the relevant double tax treaty depending on the jurisdiction of residence.

Your tax treatment depends on your individual circumstances and may be subject to change by HMRC in future. Nothing on our site constitutes tax advice; these tax rates are provided as an indication only and all investors are strongly advised to obtain independent advice.