Community broadband scheme - 5% annual return over 3 years

geoffers4

Spotted this investment opportunity in our local community broadband scheme, which I'd be interested in your thoughts on... what factors should I consider before investing?
https://levensb4rn.com/investing
https://b4rn.org.uk/wp-content/uploads/2020/08/Invitation-to-Subscribe-for-shares-in-B4RN.pdf
In summary the local community dig trenches and lay their own fibre-optic cables to connect rural villages around the South Lakes to super-fast broadband. 7500 properties already connected, and growing all the time. Current offer is 5%pa with a minimum 3-year investment of between £100 to £100k. 

arnoldy

I'd be suspicious. Another version of those "buy a car parking space" or "buy a hotel room" schemes. Why not just invest on the market? eg long term FTSE all share total return = 7%, and you are not exactly starting from a high.

Thrugelmir

Read the full terms and conditions. 5% is far from guaranteed. Even then is paid out in the form of additional shares. One assumes to provide additional capital funding and continue the roll out. 

Albermarle

This organisation already raised £3Million via the Triodos crowdfunding website , last year .
In this case the interest was payable in cash , not shares, and was backed up by a very detailed prospectus . Although the bonds involved are not easily tradeable .
I'd be suspicious. Another version of those "buy a car parking space" or "buy a hotel room" schemes. Why not just invest on the market? eg long term FTSE all share total return = 7%, and you are not exactly starting from a high.
Not all crowdfunding schemes are dodgy and if it supports a local enterprise then maybe you get more out of it than just the % return .

george4064

Wouldn’t touch it with a bargepole.

DiddyDavies

geoffers4 said:

 Current offer is 5%pa with a minimum 3-year investment of between £100 to £100k. 

Not exactly.
The current offer is:

.Annual interest will be paid at a rate which will be determined by the Board after taking into account the financial position of the Society and FCA rules. At present the target rate is 5% which is paid in the form of additional shares credited to the investor’s account. 

So they are aiming for 5% but if the financial position of the society changes, it may well be less and there is no guarantee that after the first 3 years you will be able to get your money out if you want to:

 From Year 4 onwards investors may apply to withdraw their investment. B4RN puts aside an amount each year to fund these withdrawals, however the amount available will be subject to the Society’s trading position and will be at the discretion of the Directors, so there is no guarantee that there will be sufficient funds put aside in a particular year to meet all demands for withdrawal.

Another_Saver

Let others take the risk. Most stock markets can achieve a real return of 4%-6%.

NottinghamKnight

It's not an investment, maybe a worthwhile cause you may choose to support which is a very different thing. A key element in investing is to be clear in your aim, any opportunity which is marketed as potentially earning you money, but also could do something for a charity, or the environment, or social good etc etc be very wary, carbon credits spring to mind.

geoffers4

Just to be clear - I do have a personal interest in seeing this organisation continue to grow. I'm 1 village away from getting connected and looking at what they've delivered so far as a community effort - over 7500 properties enjoying broadband speeds typically measured around 450MB - it could be a worthwhile cause to support.
Noting the risks around future returns and withdrawal of funds after 3 years... I wonder how I could assess the financial viability of the business model they are operating? It's a not-for-profit, with continuing growth, charging each customer £30 per month for a service not available from BT or anyone else in this area (currently). 

Thrugelmir

Been going since 2011. Suggests that the project has been financially viable. With the aim of redeeming all outstanding shares by 2027. When presumably the bulk of the roll out will be complete. Sort of project I would contribute too for my own benefit rather than looking for an investment return. 

Apodemus

I would make a couple of observations:

Firstly, I've looked at similar offerings for joining local windfarm community schemes.  These were offering a 10% annual return for potentially twenty-five years - but there was no promise over any uprating for inflation, very little prospect of being able to cash in at any time and no guarantee of any residual value at end-of-life.  In my mind the best comparator might be a similar term, fixed-rate annuity.  

Secondly, be wary of technology or government stance overtaking the scheme that you are investing in.  I've seen communities advised that the only way to get decent broadband was to invest in it themselves,  set up their own scheme at high capital cost, then less than five years down the road have the business model blown away by Government subsidy for fixed infrastructure, allowing the big companies to provide a better service at  a lower-cost  to householders.