Rectory Homes Bond 6.25% mini-bond - Worthwhile?

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gs1647
gs1647 Posts: 49 Forumite
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Something different, I'm not sure about it, property in the south east sounds appealing, what do others think?

Rectory Homes has launched the ‘Rectory Homes Bond’, a secured five year fixed-term corporate mini-bond offering investors 6.25% gross interest per annum. The bond is the first of its kind to be offered by a UK new homes developer. The funds raised will be used to expand the business, with approximately 80% of the proceeds being used to invest directly in new development sites in the South East of England.
The minimum initial investment per applicant is £500 and thereafter further Rectory Homes Bonds can be applied for in multiples of £100. The bonds are eligible for investment by a UK Self Invested Personal Pension (SIPP) but not for Individual Savings Accounts (ISAs) and are non-transferable. The Rectory Homes Bonds will rank ahead of any unsecured debt obligations of the Company. The offer period is open from 23 February 2015 until 1:00pm on 23 March 2015

The What Investment website has reservations regarding the structure of mini bonds. Bonds cannot be transferred to other investors so the buyer of the bond cannot get their cash out before the due date. As they are non transferable there is no really way of knowing what the market value is so they need to keep a close eye on what the business is doing to know what they are worth.

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  • Jonbvn
    Jonbvn Posts: 5,562 Forumite
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    If you are keen on such riskier investments, I would suggest you look at some of the p2p lending sites. Several lend on (secured) property at a higher rate than this. They also offer a secondary market to allow you to withdraw funds.
    In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot:cool:
  • ctdctd
    ctdctd Posts: 1,080 Forumite
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    gs1647 wrote: »
    ... with approximately 80% of the proceeds being used to invest directly in new development sites in the South East of England.

    So the other 20% goes on fees and the administrators fleet of Jaaaaaaaggs? :p

    As above, if you want to try this, put SOME of your investment pot with one or more of the P2P lenders.
    Do Money Saving sites make you buy more bargains - and spend more money?
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
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    gs1647 wrote: »
    Something different, I'm not sure about it, property in the south east sounds appealing, what do others think?
    With this product you are not investing in appealing property in the south east, you are lending money to a builder who wants to grow his business.
    The What Investment website has reservations regarding the structure of mini bonds. Bonds cannot be transferred to other investors so the buyer of the bond cannot get their cash out before the due date. As they are non transferable there is no really way of knowing what the market value is so they need to keep a close eye on what the business is doing to know what they are worth.
    Put another way, there is no way of knowing what the market value is because they have no market value at all. They are not marketable. You don't need to keep a close eye on what the company is doing because whether it is doing well or badly, you can't get your cash or do anything about it.

    Apart from an idle curiousity over whether you'll get paid what you hope, or half of what you hope, or a return of negative 100%, there is no real need to assess value as it doesn't let you take any action to cash out gains or avert further losses.

    Of course, nearer maturity it might help your future plans if you know that the money is not going to come back to you, so you don't make unnecessary spending plans or line up future followon investments for the proceeds. So, you can do some more research on the company as maturity approaches - but research on private companies is rather difficult and expensive, and any financial statements can be 9 months out of date by the time they are published let alone by the time you get around to reading them.
  • redux
    redux Posts: 22,976 Forumite
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    I did a search and I've just been reading about Elms Park in Thame.

    Interesting, but maybe more as a soap opera.
  • jimjames
    jimjames Posts: 17,619 Forumite
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    If you're prepared to risk your money why wouldn't you just use a S&S ISA with the appropriate funds? You've then got instant access and immediate visibility of the valuation.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • colsten
    colsten Posts: 17,597 Forumite
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    OP, read these before you jump:

    http://www.telegraph.co.uk/finance/personalfinance/investing/10615429/Retail-bonds-and-mini-bonds-the-risks-and-rewards.html

    http://www.telegraph.co.uk/finance/personalfinance/investing/bonds/11383946/Energy-mini-bonds-investors-out-of-pocket-as-interest-payments-are-halted.html
  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    It is illiquid and has 100% loss of capital potential. It you are willing to accept that level of risk then why not consider more conventional investments?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • enthusiasticsaver
    enthusiasticsaver Posts: 15,594 Ambassador
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    I think this would be too risky for me especially if the bottom falls out of the housing market again. What happens if Rectory Homes goes bust?
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
  • PeacefulWaters
    PeacefulWaters Posts: 8,495 Forumite
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    Why do they feel the need to ask individuals to invest in this?

    Because institutional investors don't think the return v risk provides good value.
  • doe808
    doe808 Posts: 452 Forumite
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    For South East housing exposure, surely Berkeley Group would be a better bet? Obviously not a bond- but the shares paid around a 7.5% dividend last time I checked (for disclosure I don't hold these shares).
    Total - £340.00

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