Risks involved in participating in an Alternative Investment Fund (AIF) include the following.
Achievement of income and capital returns will depend on a range of factors, related both to the asset and the wider economy. Past performance is not an indication of future performance, and you should be aware that you might not recover the amount invested. You should ensure that you understand, in particular, the effects of exchange rate fluctuations and taxation on your investment return.
Real estate investments can perform in a cyclical way, and values may increase or decrease accordingly. Economic, political and legal issues can affect values as they would other asset classes. Any future downturn in the real estate market could materially adversely affect the value and income generated from a property investment. Investors are to individually assess and establish their level of comfort with this risk from the outset.
Other specific market and economic factors that may affect the value of real estate assets include the following examples :
From time to time, vacancies can be expected to arise in the operation of real estate assets. In some cases, sizable vacancies may mean there is less cash available for distribution to investors.
In the event of a tenant failing to meet its obligations to the owner of the property, investors will experience a fall in the cash receipts and cash available for distribution to them. Bankruptcy laws can be used by a tenant at any time for their protection, and this can mean that their lease is terminated and rejected. As a result, the tenant may no longer make any more payments on time, or any payments under its lease at all.
Competition is prevalent among real estate owners and can lead to lower than expected returns.
It cannot be guaranteed that there are no environmental liabilities, that no environmental liabilities may at some point occur, that some material environmental condition was made by a previous owner that is unknown to the property owner, or that changes in the future will not mean the property owner will incur liability, for example and without limitation, to changes in environmental laws.
In the case of remedial action whereupon environmentally harmful substances must be removed, the costs associated with doing so may be very high. Further, the value of the asset and/or the property owner’s aggregate assets may be far exceeded by the cost of any required remediation. Failing to carry out the required remediation removal of environmentally hazardous substances may result in it being more difficult for the affected asset to be sold or used as collateral.
The management of the asset and the company owning it will impact the success of the project. Should any of the senior management leave, operations may be adversely affected.
Adequate cash for distribution to investors cannot be guaranteed in any given quarter.
Tax risks can be significant. You should be aware that each individual investor may need to consider different tax rules. Prospective investors are strongly advised to consult with tax professionals as to their specific tax situation, relating to the purchase, ownership and disposal of investments and possible changes in the tax laws or the regulations.
Investors should note that market and currency ups and downs can affect the value of one’s investments, and the income they earn which may rise or fall as a result.
Real estate investments featured on BrickVest constitute private transactions. As such, they are not publicly traded on stock exchanges and may not be rapidly sold or traded. Whilst you can advertise your investment for sale to other BrickVest users at any point, the platform provides no guarantee to match your sale with a buyer.
Prior to investing, you should consider the likelihood that you will hold an investment for its full lifecycle, and as such it is a long term investment.
Each investment offering includes a business plan outlining the expected hold period of the asset. In the event that market conditions at the time of maturity of the investment are poor, a commercial decision may be taken as to whether to extend the holding period. Any such decision would be taken jointly by BrickVest and the Sponsor, and would be taken only if called for by such market conditions and with the aim of avoiding a property resale value substantially lower than the initial purchase price.
Conversely, an investment may also be sold before maturity if this accelerated sale is deemed by BrickVest to be in the best interest of all shareholders.
As an investor, you participate in a fund (“Alternative Investment Fund” or “AIF”) managed by BrickVest (the regulated investment manager) and overseen by an independent fund depository.
The sole purpose of the AIF is the investment described in its Investment Offering documentation. Investors have a legal right to any income and profit that may arise from the AIF, regardless of BrickVest’s existence.