upd bond brochure

7/30/2019 UPD Bond Brochure

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Chicago Social

Housing ProgramInvestment Memorandum


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Our company

ethos is summed

up in one

simple phrase,making money,

while doing good


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Contents

Executive Summary 4

Social Housing Program Overview 8

Investment Strategy 10

Strong Rental Cashfow 12

Housing Choice Voucher Program 14

Fair Market Rents 16

Why Invest in Chicago 18

About Us & Our Partners 20

Why should I Invest Now? 21

Buying Process & Returns 22

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Executive Summary3 Year Social Housing

Program (SHP) with18% Net Return per

annum and a 5%

bonus on redemption

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100

95

90

85

80

75

70

65

60

55

502006 2007 2008 2009 2010 2011 2012 2013

Source: Clear Captital Home Data Index

Relative

IndexValue

U.S. National

Home Prices Historical

U.S. National 1 Year

Home Prices Forcast

The Social Housing Program (SHP) bond

launches in early 2012 with express objective

o re-housing up to 2,000 amilies in the

Chicago area.

Over the 3 year period an investor will receive

returns equal to 18% per annum, paid every

6 months, plus up to 105% o the ull amount

invested upon redemption.

The SHP is a Socially Responsible Investment

(SRI) as our main objective is to help provide

sae, clean and decent housing to either the

very low or low-income amilies in the Chicago

area. On each sale made we also donate $25 to

Kiva which helps to ght worldwide poverty.

The US housing market has been on adownward path since it reached an all-time

high in late 2006 early 2007. However, ater

plummeting over 50% in some areas the

consensus is we may have nally ound a

bottom to the market. The graph below shows

that the vast majority o the drop in prices

occurred between mid-2006 and early 2009.

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Whilst the property prices have dropped,

oreclosures have skyrocketed orcing many

thousands out o their homes.

This in turn has increased the demand or

good rental properties and this has been

urther compounded by the banks in the US

keeping a very tight rein on mortgage nance.

This restriction o credit is orcing not just

those that have lost their homes into the

rented sector but also rst time buyers. This

perect storm has created a once in a

lietime opportunity in the US housing market.

The 3 year social housing program bond

has been designed to allow both private and

institutional investors an opportunity to benet

rom these circumstances. Returns o 18% perannum are available. This is asset backed and

secured upon the property held and managed

by us.

All unds are held in a segregated escrow

account by Chancery Solicitors who will hold a

1st lien foating charge over the entire property

portolio, which in the event o non-payment o

the interest, will crystallise into a xed charge

with ull rights o repossession.

This oer o investment originates outside the USA and is

being made under regulation s o the securities act 1933.

The bonds have not been registered under the US Securities

Act 1933 and may not be oered or sold or resold in the

United States or to any US residents.0%

2%

4%

6%

%o

fActiveLoans

Dec-05

4.66%

Dec-05

0.48%

Sep-11

4.18%

Sep-11

8.09%

Foreclosure

Delinquent

Jan-10

10.97%

8%

10%

12%

1995

-01

1995

-06

1995

-12

1996

-06

1996

-12

1997

-06

1997

-12

1998

-06

1998

-12

1999

-06

1999

-12

2000

-06

2000

-12

2001

-06

2001

-12

2002

-06

2002

-12

2003

-06

2003

-12

2004

-06

2004

-12

2005

-06

2005

-12

2006

-06

2006

-12

2007

-06

2007

-12

2008

-06

2008

-12

2009

-06

2009

-12

2010

-06

2010

-12

2011

-06

Total Delinquent and Foreclosure Percent by Month

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Returns of 18% per

annum are available.This is asset backed

and secured upon

the property held and

managed by us.

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8

3 Year Social Housing

Program starts inChicago 2012

Social Housing Program Overview

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Our company acquires distressed property,

typically 2-4 unit multi dwelling houses in both

West and South Chicago. Ater a comprehensive

reurbishment process we let these properties to

US amilies under the Housing Choice Voucher

Program, ormerly known as Section 8. This

allows the company to achieve high rental

yields that are paid and underwritten by the

US Government.

In some cases the company may sell

a proportion o its portolio to help accelerate

growth and use leverage where appropriate.

There is a minimum initial investment o

10,000 and subsequent purchases at 5,000.

The annual returns are 18% o the suminvested which is paid bi-annually. The start

date is exactly 6 months ater the nal date o

subscription. This allows or administration,

property acquisition, reurbishment and rental.

The nal redemption payment is paid ater

3 years and can be up to 105% o the original

investment.

A proportion o the prots are placed in a

sinking und to ensure that all current and

uture bond obligations can be met.

All unds are secured against the properties

held in the portolio and kept in a segregated

escrow account with the Chancery Solicitors,

who are based in Westminster, London.

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10

Investment strategy

to help re-house 2,000

families in Chica o. The

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We ocus on multi-unit dwellings which contain

between 2 4 apartments. All properties are

bought direct rom US banks or via Foreclosure

sales and are reurbished to a high standard,

which includes new kitchens, bathrooms,

windows and wooden foors.

Yields achieved are sucient to deliver the

necessary dividend returns to the Bond

investors whilst allowing the company to

continue to grow.

Throughout the three year term, we will actively

manage each property to maximise the returns.

This will include a mixed strategy o buy & hold,

buy & sell at the most appropriate times.

We expect to undertake more property dealingin the rst 18 months whilst prices are

particularly low, which will help to accelerate

growth beore switching to a longer holding

strategy as the redemption dates approach.

The table below shows the Housing & Urban Development* (HUD) departments agreed rent payable in

Chicago or 2012.

One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom

$853 $958 $1,171 $1,323

We can acquire a 2 unit property or as little as $30,000 - $35,000 and reurbish it or approximately

another $30,000. A 2 unit property with one 2 bed and one 3 bed apartments will produce a rentalincome o $25,548 per annum. I we take an acquisition and reurbishment cost o $65,000 we will

achieve an un-leveraged yield o 39.3%.

Another option is to acquire, reurbish and sell. The above example could be sold or $100,000 and still

produce an un-leveraged yield o 25.5% per annum or a buy to let investor.**

The gures achieved are even better on a 3 unit dwelling. In this example the property has one 2 bed

and two 3 bed apartments. A typical acquisition and reurbish cost would be approximately $80,000.

The rental income generated by this property would be $39,600. This would provide an un-leveraged

yield o 49.5% or an un-leveraged prot o $78,400 i we sold at a cap rate o 25%.

The sale o just one o these 3 apartment properties generates enough cash to cover all the Bond interest

payments and the nal redemption payment. (based on an investment o $80,000, see below.)

Bond Investment $80,000 Bond Interest @ 18% per annum $14,400

Property Type 3 Apartments 8 Beds Total Bond Interest Payable $43,200

Rental Income as per FMR $39,600 Redemption Payment @ 105% $84,000

Cap Rate 25%

Sale Proceeds $158,400 Total Repaid to Bondholder $127,200

All o the returns shown above are un-leveraged.

The Fair Market Rent (FMR) is set by the Housing & Urban Development department and is paid direct

to either the investor or the investors agent, thus guaranteeing a certain level o rental income.

All unds invested are secured with a 1st lien charge against the property portolio and we also have a

sinking und which acts as urther insurance against the non -payment o investor returns.

* The HUD is a US Governmental Department

** Investors who wish to buy property outright should contact us direct

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Strong rental cashfowThe US homeownership

rate has fallen to around

6 million homes since

2007 and this hasincreased the demand

for good quality rental

properties.

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1970

62

64

66

68

70

62

64

66

68

70

1975 1980 1950 1990 1995 2000 2005 2010

Homeownership Rate: United States

Source: Cesus Bureau/Haver Analytics

1 People who have suered rom a oreclosure still need somewhere

to live and thereore their only option is to rent.

2First time buyers cannot get a mortgage to buy a property so they

are orced to rent instead.

3 Voluntary Deault, whereby a regular borrower hands back their

keys because they are in a negative equity position and they decide

they would be better o renting.

As more people are orced to become renters, the demand or rental

property increases and this creates upward pressure on rental prices

as can be seen in the graph opposite.

There has been a steady and inexorable rise in the price o rental

income across the US since way back in 1983.

0

20

50

75

100

125

150

175

200

225

1983

1983

1983

1983

1983

1983

1983

1983

1983

1983

1983

1983

1983

1983

1983

Source: www.housingbubble.jparsons.net

U.S House Prices vs Owner Equivatlent Rent

Owner-equivalent rent index

Home price index

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14

What is the Housing Choice Voucher Program?

Most of the properties

will be let to new

prospective tenants

under the Housing and

Urban Developments

(HUD) housing choicevoucher (HCV) program,

formerly known as

Section 8. This secures

the long term future of

the company as all rental

income is underwrittenby the US Government

and paid direct to us.


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The housing choice voucher program is the

US Federal Governments major program or

assisting very low and low-income amilies, the

elderly and the disabled to aord decent, sae

and sanitary housing in the private market.

Since housing assistance is provided on behal

o the amily or individual, participants are able

to nd their own housing, including single-

amily homes, townhouses and apartments.

The participant is ree to choose any housing

that meets the requirements o the program

and is not limited to units located in subsidised

housing projects.

Housing choice vouchers are administered

locally by public housing agencies (PHAs).The PHAs receive ederal unds rom the

U.S. Department o Housing and Urban

Development (HUD) to administer the voucher

program.

A amily that is issued a housing voucher is

responsible or nding a suitable housing unit o

the amilys choice where the owner agrees to

rent under the program. Rental units must meet

minimum standards o health and saety, as

determined by the PHA.

A housing subsidy is paid to the landlord

directly by the PHA on behal o the

participating amily. The amily then pays the

dierence between the actual rent charged by

the landlord and the amount subsidized by

the program. Under certain circumstances, i

authorised by the PHA, a amily may use its

voucher to purchase a modest home.

TheRentSubsidy

The PHA calculates the maximum amount o

housing assistance allowable. The maximum

housing assistance is generally the lesser o the

payment standard minus 30% o the amilys

monthly adjusted income or the gross rent

or the unit minus 30% o monthly adjusted

income.

All rental payments are paid direct rom the

US Government department HUD into our

managing agents bank account, where it is

combined with the tenants contribution beore

being orwarded on to us.

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The Fair Market Rent is the 40th percentile o

gross rents or typical, non-substandard rental

units occupied by recent movers in a local

housing market.

40th percentile: The 40th percentile is that

point in a distribution o numbers at which

40% o the numbers are less than or equal to

it and 60% o the numbers are greater than or

equal to it. In the set o numbers {$395, $458,

$486, $517, $675}, $458 would be the 40th

percentile. The 40th percentile is similar in

concept to a median; the median is the 50th

percentile.

Gross rents: Gross rent is the sum o the rent

paid to the owner plus any utility costs incurred

by the tenant. Utilities include electricity, gas,

water and sewer and trash removal services but

not telephone service. I the owner pays or all

utilities then gross rent equals the rent paid to

the owner.

OneStrikePolicy

Unlike the UK, where unruly tenants seem to

repeatedly get re-housed, this does not happenin the US under the HCV programme thus

protecting our investment. I the tenants do not

pass any o the routine inspections or ail to pay

just one monthly rent, they are given 30 days to

rectiy the problem and i this isnt done they can

be evicted.

Any tenant evicted rom the HCV Section

8 home cannot get back into the scheme

anywhere in the US. Under the scheme theHCV Section 8 payments can cover rom

70% up to 100% o the tenants rent.

Obviously tenants try hard to not lose this

support thus ensuring the property remains in

good condition and in most cases treating it as

i it were their own.

HowHUDMatchestheFMRDefnitionWithDierentDataSources

Element 1990Census AmericanHousing

Survey

RandomDigitDialing

Survey

PublicComment

Gross Rent Recorded by census Recorded by AHS Respondents indicate

utilities they pay or and

HUD estimates monthly

costs rom local housing

authority data

Varies. I the comment

contains an RDD, HUD will

estimate utility costs using

local housing authority

data. Otherwise, HUD willestimate rom 1990 census

Recent mover Moved in past 15 Months Moved in past

18-22 months

Moved in past

12-15 months

I public comment does

not contain recent mover

inormation, HUD will

estimate rom 1990 census

Public Hous ing Adjus ted HUD based on AHS Eliminated by HUD rom

AHS inormation

Eliminated in survey Varies . HUD can est imate

rom AHS data

Built in past

2 years

Eliminated by Census Bureau in

extract.

Eliminated by HUD rom

AHS inormation

Eliminated in survey Varies . HUD can est imate

rom 1990 census

Substandard

units

Census extract excludes units with

major decencies HUD makes

urther adjustment based on AHS

HUD uses AHS denitions

o serious problems

No separate adjustment* Varies. HUD makes

adjustment i needed

Seasonal un its Cen sus extr act excluded Excluded by HUD rom AHS

inormation

Eliminated in survey Varies

Atypical Census extract excluded Excluded by HUD rom AHS

inormation

Eliminated in survey Vaires

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Why invest in ChicagoChicago has one of the

worlds largest and most

diversied economies,

a gross regional product(GRP) of $500 billion

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DiverseEconomy

Chicago is home to more than 400 major

corporate headquarters, including 27 Fortune

500 Headquarters. Rated #1 Large US

Metro or Economic Diversity by Moodys

Investor Services, Chicago is a key player in

every economic sector rom risk management

innovation to manuacturing to inormation

technology to health services.

TradingPost

The most distinctive aspect o Chicagos

nancial services community is also among

its oldest. The citys derivatives exchange

community, which started with commodity

utures trading at the Chicago Board o Trade in

1848, established the city as a global nancial

centre. To this day, even though the trading o

derivatives is conducted on an ever-expanding

international scale, Chicago arguably remains

the geographic centre o global derivatives

trading in terms o markets, scale and talent.

Over $3 billion in global derivatives trading

volume, nearly 2X the trading volume o New

York

Chicago-based Options Clearing Corporation

clears all US options contracts worth nearly

$2 trillion in 2008

Chicago utures and options exchanges

collectively dominate exchange-based

derivatives trading, with 51% o exchange-

based derivatives trading in the U.S.

Since 2000, the volume o global derivatives

trading has increased rom a little over 2 billion

contracts traded to more than 17.4 billion;

Chicagos exchange community accounted or

18% o the global increase and 48% o the

U.S. market increase.

GrowingEconomy

Chicago continues to grow: total trade

surpassed $160 billion in 2010 (up rom $95

billion in 2004). Chicago is top-ranked or

economic potential among major cities across

the world and in 2010, World Business Chicago

identied more than 230 medium-sized new

& expanding acilities announced, under

development or completed in the metro area,

representing a total o more than 14 million

square eet and nearly $2 billion in economic

development activity. In August 2010, Inc.

Magazine included 202 companies rom the

Chicago region in its annual list o the 5,000

astest-growing companies in the U.S., placing

Chicago 4th among metro regions or number

o Inc. 5000 companies; the city itsel ranked

second with 101 companies.

Source: www.worldbusinesschicago.com/data/economy

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About us and our partners

Our company has been established to take

advantage o the dislocation in the US housing

market and to provide both private and

institutional investors seeking above average

asset backed returns, the opportunity to benet

rom this situation.

The management team has over 40 years

combined property experience and currently

manage in excess o 1,000 properties across

the Chicagoland area.

All property acquisitions, sales and title

insurance services are managed by the Chicago

Title company, who have been in business or

160 years and have branches across 40 states,

making them one o the largest specialist title

and escrow companies in the US.

UK Based law rm, Chancery Solicitors act as

Escrow agent, and hold 1st lien charge over theproperty portolio until all payment obligations

have been ullled.

Our realtors regularly sell in excess o $25m

worth o property per year in the Chicago area.

Please see details below o our trusted advisors

& partners based in both the USA and UK

USA

Chicago Housing Authority Chicago USA.

Lawyers Berg & Berg, Attorneys at Law,

Chicago, USA

Accountants Steinberg Associates,

Chicago, USA

Bank JP Morgan Chase, New York, USA

Property Goldtree Realty Inc, Chicago, USA

PropertyManagement

Acorn Property Management, Chicago, USA

Title&ClosingAgent Chicago Title Company.

UK

ProductAdvice:Clive Wolman, Barrister atLaw, Lincolns Inn Fields, London

Accountants:Baker Tilly, Chelmsord, Essex

Bank Barclays

Solicitors Chancery Solicitors, London

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Why should I invest now?

Limited number o bonds available.

To take advantage o the exceptionalreturns without any o the hassles o directownership.

Guaranteed returns paid every 6 months.

Short to medium term. Returns andredemption payments are concluded ater3 years.

Asset backed Investment.

UK Based Solicitor holds a foating 1st liencharge over the entire property portolio untilall bond payments have been disbursed.

75% rule. The amount o bondholders moneyinvested cannot be above 75% o the value othe property portolio.

Extra security provided by solicitor heldsinking und.

Assured above average returns o 18% perannum.

Assured Capital growth o 5%.

Secure exit strategy in place. Fully SIPP/SASS compliant structure.

No need to register or pay US Taxes.

No need to open a US LLC or bank account.

Secure alternative investment managed by oneo the US largest title insurance companies.

Property management, trading anddevelopment team in place with over

a combined 40 years experience.

No worries about maintenance orreurbishment issues.

No void periods.

Low entry level, just 10,000.

Flexibility. More bonds can be bought orjust 5,000 each.

The ultimate armchair investment. Purchaseyour bonds and thats it. Sit back, relax andwait or the returns to arrive.

A once in a lietime opportunity to benetrom low property prices and high rents in

the worlds largest economy.

Bonus 5% interest payable to early bird

investors.* See table below.*Investment must be made before April 30th 2012.

Fixed Annual Returns $50,000

Yr118%

$9,000

Yr218%

$9,000

Yr318%

$9,000

Redemption

@ 105%

$52,500

Total

$79,500

AnnualEquivalent

19.66%

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Buying process

Complete and sign the Bond Application orm

Enclose relevant Anti-Money Laundering

documents (2 orms o ID, one showing your

current address which must also be dated

within the last 3 months and one which must

be a picture ID such as a current Passport or

Driving Licence)

Sign either Sophisticated Investor (SI orm)

or High Net Worth Investor (HNWI orm)

Forward a minimum o 10,000 to

Chancery Solicitors

Bond Certicate Issued

First returns received 6 months rom the end

subscription date o November 30th 2012.

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