Capital appreciation or depreciation (see Key Risks) is realised when you exit your investment. There are two principle ways to exit:
1. Offer your investment for sale via London House Exchange (LHX).
You can do this at any point. You can choose the price at which you offer your investment for sale. Your investment is then listed as a Resale opportunity to other investors.
We provide you and prospective purchasers of your investment with an estimated valuation (on a per share basis) which is updated every quarter from independent RICS accredited surveyor valuations. And, of course, you’ll be able to see the prices at which previous shares in that property have traded, as well as the prices currently being bid by prospective buyers.
Ultimately it is your decision what price to buy or sell at, our estimated valuations do not constitute, and should not be considered, investment advice.
Depending on the price you are offering your investment for sale, the opportunity may or may not appear attractive to prospective buyers (and therefore may or may not sell). You can adjust the price to make it more attractive to buyers. However, there is no guarantee that anyone will be willing to buy your investment from you, whatever the price. In this scenario your opportunity to exit is limited to (2) below.
2. Exit after 5 years at market value
On each fifth anniversary of the completion of the transaction on the platform, each investor in the property has an opportunity to sell their holdings at fair market value. This process is outlined as follows:
The property is inspected and valued by an independent Chartered Surveyor with reference to factors such as recent transactions and the condition of the property, adjusted for any potential liabilities that the SPV may have, such as a mortgage or taxation. This is then divided by the number of shares the SPV has issued (1,000,000 in most cases) to create a per share market value.
Investors that would like to exit at this point will be aggregated into a block which will be relisted on the London House Exchange platform at the per share market value for up to 4 weeks. This process is similar to the initial crowdfunding of a new listing.
If this process is unsuccessful for whatever reason, London House Exchange will commence proceedings to sell the underlying property. The property will be advertised for sale on the open market at the valuation determined by the Chartered Surveyor. London House Exchange will administer this process and is obliged to act in the interests of investors to maximise financial return. On successful completion of the sale, all investors in that property will be exited and net proceeds will be distributed to investors. Note that third party costs, such as legal fees, will reduce the proceeds available for distribution to investors, but London House Exchange will not charge any fees or make any profit margin on the third party fees.
It should be noted that if the underlying property is sold, this process will take as long as required and typically the sales process is between 3-4 months. However, there is no guarantee of this as the sale could take longer.
Funds are returned to investors once a Members Voluntary Liquidation (‘MVL’) has been completed on the SPV. This process takes 2-3 months once the sale of the whole of the underlying asset has been sold (i.e. in a multi-unit property, all units would have to be sold before an MVL may commence). The MVL process means the return of funds to investors are treated as capital rather than income.
Further information on the 5 yearly anniversary process can be found here.