It is important that all investors have clarity as to the terms of their investments, so we thought we’d write this helpful blog to explain how the exit process and voting works.
Each property is held for an initial fixed term (usually 3-years) after which the assumption is that the property will be sold unless 75% of investors vote to retain the property (by share proportion).
Selling a property will result in a gain or a loss being crystallised for investors and so, for those that do not vote, we will assume that they will vote to retain the property to avoid affecting investors’ tax position unintentionally.
Vote to retain – voting Option 1
Many investors wish to retain their investment as they see property as a medium to long-term investment. Holding a property for only a few years may not give the asset sufficient time to mature, especially where renovation or other works have been conducted that result in a capital expenditure.
Should 75% of the investors vote to retain the property, then it will be kept and managed for a further term of 1-year with existing investors retaining their shares. Following that, the exit process will begin again.
For those investors who vote to exit the property, their shares will be listed for sale on the website for the value at that time. You can read more about how we value the shares here.
As part of this process, we will need to raise further funds to pay for the new term’s fees and expenses including property insurance and any known maintenance costs. Property Moose will charge a fee of 1% of the value to cover costs of processing the investment for a further term (including FCA fees and merchant costs).
We plan for these additional costs to be covered by the listing of new shares that can be acquired by new investors or the existing investors. This will raise additional capital for the SPV through the issue of new shares with the funds then used to pay the relevant fees and expenses. It is important to note that, if the existing investors do not acquire their proportion of the new shares being issued, some dilution of their holding will take place.
Vote to sell – Option 2 and 3
Option 2 - Sell to the crowd – again, many people want to retain the property and selling the property back to the crowd not only allows people to do that but also usually may mean a better and quicker deal for those wanting to sell. Sales on the open market can take several months and the price is unknown. A sale to the crowd is usually very quick and at a fixed price.
Option 3 - Sell on the open market – if the majority select this option then the property will be placed on the open market for sale at the guide price given as part of the valuation process.
Please note that, if you vote for Option 1 and (i) the 75% vote does not pass to retain the property and (ii) over 50% vote for option 1 and 2 (together), then the property will be sold to the crowd via a new SPV and you will sell your shares in the existing SPV and automatically be re-invested in the new SPV, thereby retaining your interest in the property. This will result in either a gain or a loss at the point of sale.
Disclaimer and Legals
Property Moose does not provide any advice in relation to investments and you must rely on your own due diligence before investing. Please remember that property prices can go down as well as up and that all figures, rates and yields are projections only and should not be relied on. If in doubt, please seek the advice of a financial adviser. Your capital is at risk if you invest. This post has been approved as a financial promotion by Resolution Compliance Limited.
Property Moose is a trading name of Crowd Fin Limited which is an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (no: 574048).
