Keystone Property Group - opinions?

[Deleted User]

For some time now I've been watching Keystone Property Group, a property manager for a developer High Street Group (I don't know their legal structure, it's something like that. Front name for investment is Keystone Property Group).


They advertise their loan note, which is 1 up to 7 years loan investment to fund their property business. Loan pays from 12 up to 22% per annum, depending on longevity.



Their claims:
£50 Million Paid back to investors since 2013
Current GDV of Group Projects is £750 Million+
Security - Corporate Guarantee on 100% of Capital / Debenture held by Trustee


Websites:
www.keystone-property.com
https://thehighstreetgroup.com/



I have some marketing materials, with their portoflio of properties they've built and more. I can send parts of it here if required, or in private.


Has anyone seen, or used them before, and can comment on their reliability? How big is risk here, knowing their past performance? Maybe I am being mislead and all is not as it seems?

Aretnap

I'm not familiar with the specific company, however as always with this type of 'investment'two questions immediately spring to mind.

(1) If it's such a low risk business, why don't they borrow money from the bank, or professional investors/venture capitalists at 4 or 6% instead of offering their loan notes to punters at 12-22%?
(2) If the banks and professionals won't touch them (the only reason why you would seek funding from the general public at such high rates) why not? What do they know that you don't.

Best case scenario is that this is a much higher risk business than you realise, and that it comes with a substantial risk of losing most or all of your money. The worst case is that it's run along the same lines as London Capital and Finance (Google them or see the long thread which is probably on the first page of this forum) which offered similar high interest 'asset backed' loan notes,and recently went bust with most of the investor's money having found its way into the directors' pockets, or paid out in commission to dubious middlemen. I would not touch an investment like this with a bargepole. Not should you unless you have experience of forensically examining a company's accounts (not marketing material) and know the signs to look for in order to assess it's financial stability and the trustworthiness of the people running it.

[Deleted User]

Thanks Aretnap, your input is invaluable for me.

[Deleted User]

I asked rep why don't they borrow from banks/institutional investors/VC, that's what he replied:

That’s a question I am often asked. And in actual fact HSG do often borrow from the banks as well.


But just like many other property development companies they find traditional bank lending a lot more restrictive as banks generally lend to a specific project and it takes a long time to actually cut through red tape.


For example at keystone we have raised funds for HSG many times before through our clients to fund a new development. But this will be at an early stage. Once the planning is approved and work begins, the bank loan will also kick in and our clients are paid their money back plus a healthy profit.


The flexible loan note has been developed so the money is invested in the HSG as a whole and not any one particular project. This way the money is always readily available without any lengthy delays and it allows the HSG to act quickly (quicker than any other competitors) to acquire highly sought after land and complete developments hastily. This massively increases profit margins.


This way it actually works out considerably cheaper and more affective than bank lending, plus with HSGs regular influx of rental income we know they always afford the regular payments required for clients.

Aretnap

Well, forensically examining the accounts didn't take long.

The website doesn't make it obvious precisely what the identity of the company you're dealing with is (this in itself is a major red flag), but if it's this company (after some digging I did find the words "Keystone UK Property Group Ltd" in the disclaimer, so I assume it is)

https://beta.companieshouse.gov.uk/company/10346678

Then the company was incorporated in 2016 and the most recent accounts are made up to August 2017. At that time it was a tiny company, with total assets of £35,968. It is not immediately obvious how this can be reconciled with a claim to have returned £50 million to investors over a 6 year period.

OTOH if it is this company

https://beta.companieshouse.gov.uk/company/10493173

Then things are even simpler - as of its only account filing in 2017 it was a dormant company with £1 in the bank.

Bargepole! Bargepole! Bargepole!

jamei305

pioruns wrote: »

I asked rep why don't they borrow from banks/institutional investors/VC, that's what he replied:

That doesn't make sense. If they are assured of massive profit margins, why not avoid borrowing from both the banks and the public and simply use their own accumulated cash to invest in new projects?

Leon_W

If you fancy a laugh read this.......

http://mortimers.uk.com/wp-content/uploads/2018/09/7YearLoanNoteOverviewnew.pdf

It is, of course, lies from start to finish !

AnotherJoe

My opinion is that if you are looking for a place you can put your money with a chance of losing it all with no redress then this would be an excellent choice.

Linton

Leon_W wrote: »

If you fancy a laugh read this.......

http://mortimers.uk.com/wp-content/uploads/2018/09/7YearLoanNoteOverviewnew.pdf

It is, of course, lies from start to finish !

Looks rather like this one:https://avantiswealth.com/investment-portfolio/prs-property-developer/


It would appear that Keystone Property, Mortimers and Avantis are all selling minibonds for The High Street Grp:https://beta.companieshouse.gov.uk/company/07831810, based in Newcastle. At first sight they do seem a genuine, local but fairly large construction etc company. The OP did give their website.

Alexland

pioruns wrote: »

I asked rep why don't they borrow from banks/institutional investors/VC, that's what he replied:

If they genuinely had the ability to execute safe investments at a high return them then they would find institutional backers without having to take in lots of individuals. I really think you should stick to mainstream investments with recognised established players. These people don't even have their Companies House registration number on their website let alone any FCA registration. There are just too many very similar things that turned out to be scams.

Alex

[Deleted User]

I've got some more answers from Keystone rep. Looks like you guys have nailed it right, Keystone is a front for HSG, and everything goes to HSG. So, if someone wants to invest there, they need to bet on ability of HSG to pay it all back + promised interest. If HSG folds then there is trustee and capital guarantee, as they claim. Please see links below, maybe you can decipher something from it and judge if these promises are worth anything.


"
Please understand that all money invested into HSG goes directly to HSG. You never pay any money to Keystone.
The 100% corporate guarantee is backed by the assets of HSG.
You are correct that the keystone head office is in Sheffield, we also have a London address, an office in Chelmsford ( this is where I am based most days ) as well as representatives up and down the country and overseas. This confirms our findings that they have 2 active companies in Sheffield and London.
Keystone is a very slick organisation but the size and finances of Keystone is of no consequence.
To confirm all money is paid directly to HSG, HSG never borrow a pound unless there is at least 3 pound in assets to back it up. Ensuring there is enough capital there to completely cover your investment and honour your corporate guarantee.


Statement of the assets and liabilities from The High Street Groups Chartered accountants. This details a very favorable 3-1 loan to value ratio. In the event of default £42 million of net assets are available to be liquidated.
https://app.hubspot.com/documents/2944175/view/36302506?accessId=ab18fc


The Trustee,

An independent regulated trustee is vital to ensuring and enforcing the guarantee. In the event of non payment the trustee has the legal power to liquidate assets to recover your invested funds.
https://app.hubspot.com/documents/2944175/view/34012502?accessId=81d9fa


Signed Security Document

The security documents are held on behalf of the investors by the trustee. You receive a copy countersigned by all parties.
https://app.hubspot.com/documents/2944175/view/34012781?accessId=9242d1


Past performance

Whilst past performance is not indicative of future performance it is important to asses the history and performance of The High Street Groups previous offerings. Since the inception of the Loan note program in 2012 50 million has been raised and paid back to investors. This shows that The High Street Group do not only offer market beating returns but deliver them also.
https://app.hubspot.com/documents/2944175/view/34016814?accessId=c40f62
" end of quote



According to Pomanda, HSG is worth £40M:
https://app.pomanda.com/company/07831810/quick-valuation