Fundbricks.com ApS ("FundBricks.com" or "Fundbricks" or "Fundbricks") markets via an online platform (the "Platform") a number of investments ("Investments") in shares ("Shares") or syndicated loans ("Loans"). The Investments have in common that they are based on completed properties or real estate projects as the underlying asset. The Investments presented on the Platform are often various types of top-tier financings to private real estate companies or developers ("Project Owner" or "Company") with no or limited collateral.
All investment involves risk and investors risk losing all or part of their investment. Investment in Shares and Loans marketed through the Platform can generally be described as high, as no financial advisor or other actor directly or indirectly recommends the Investments. Fundbricks makes no guarantees about Investments or loans made by investors and encourages investors to invest carefully.
Fundbricks also encourages investors to seek personal advice from professional advisors, including investment advisors, accountants, lawyers, etc. and to conduct independent analysis and research before acting on the information disclosed by Fundbricks. Fundbricks cannot assure investors that the information provided is accurate or complete. Fundbricks in no way guarantees the success of any action an investor takes based on information published on the Platform. All material published via the Platform is therefore prepared by Investbricks and is intended for the following types of investors only:
A loan can be combined with collateral in the form of a pledge of shares or real estate, a surety bond, corporate guarantees or other collateral. Note that the collateral in this type of investment is often subordinated and/or of limited economic value. An investment in Shares cannot be combined with any separate security. As a shareholder, there is typically no possibility to reclaim invested capital unless there is sufficient capital in the joint-stock company to meet all its obligations towards its creditors and the joint-stock company's board of directors and general meeting decide on distribution.
Both Equity and Loan investments are typically dependent on the underlying property project performing as expected in order for the investment to deliver the budgeted return. For example, project owners may lack the financial capacity to manage major project deviations such as budget slippage, delays, etc. Any guarantees are no guarantee that the investor will get back the capital invested or that a return will be achieved. Investors should be aware that the entire investment may be lost.
The investments in both Shares and Loans are not covered by the Depositor Guarantee or Investor Protection Rules, which means that the investor cannot obtain any compensation under these rules if the Project Owner or the Company goes bankrupt or otherwise has payment difficulties.
Investor protection is a promise by the state to compensate investors for the loss of financial instruments and funds held by banks and other financial institutions, for example, in the event of the institution's bankruptcy. The Depositors' Guarantee covers funds in certain accounts and provides for compensation to the depositor in the event of the bankruptcy of certain financial institutions, such as banks, or if the FSA decides that the Depositors' Guarantee should be triggered.
In addition to the risks associated with the investment instruments themselves, i.e. the Shares or Loans and the collateral, the main risks are associated with the Project Owner, its financial resources, the project, suppliers and contractors, alternative sources of financing, external factors and economic cycles, regulatory approvals, etc. Below we have described the most common risk factors that are considered likely to affect this type of investment. The risk factors mentioned are not ranked and the list does not pretend to be exhaustive. Additional risks and uncertainties may exist for each Investment.
It is important to analyse the potential risks of the current investment and weigh these against the expected return. Only when you have done this and weighed your personal financial situation against the expected return can a reasoned investment decision be made.
When investing in Shares, returns are usually paid out through dividends. However, there are several types of risks which may adversely affect the business of the Project Owner and there can be no guarantee that the Company will be able to achieve a result which will enable a distribution to be made. As a shareholder, there is typically no possibility to reclaim invested capital, unless there are sufficient funds in the Company to satisfy all creditors, both short and long term, and the Company's Board of Directors and General Meeting decide on a distribution.
Shareholders with controlling influence
There is a risk that a controlling shareholder may decide, or fail to decide, certain actions contrary to the interests of the other shareholders, for example, by the controlling shareholder not choosing to decide an expected distribution or by the Company being operated in a non-purposeful manner.
Risk of dilution
The General Meeting may decide to issue new shares, which may dilute the proportionate ownership and voting rights of the Company's existing shareholders.
Value of the share on sale
The company's shares are usually unlisted shares that are not admitted to trading on any marketplace. Shareholders who wish to sell their Shares (provided that this is at all possible under the Company's Articles of Association) face the risk that the market value of their Shares may not correspond to their acquisition cost or an estimated valuation at any given time. Further, there is a risk that it may not be possible to find a buyer.
Risk of non-repayment
In the case of an investment in Loans, the return is paid upon repayment of the Loan plus interest payments, if any, combined with any amortisation previously carried out. However, there are several risks which may adversely affect the business of the Project Owner and there can be no assurance that the Project Owner will be able to achieve a profit which will enable repayment. The investments are dependent on the Project Owner having sufficient funds to meet its obligations and on the Project Owner's management or board actually making the repayments.
Risks associated with collateral
The collateral provided in connection with the Loans may in practice have an extremely limited economic value and in no way guarantee the investor's capital. For example, the value of share pledges and corporate mortgages is conditional on the company having underlying realisable assets, whereas a subordinated real estate mortgage is conditional on the property being realisable at a price which can meet all obligations to the primary mortgagee and on there being surplus capital. As an investor, you need to assess any security carefully and, regardless of how good the security is, you should expect that it will take time to recover your capital in the event of a realisation of the mortgage. There is a risk that the pledge may turn out to have no or limited value.
Risks associated with the activation of guarantees
It is usual for a parent company to guarantee a loan as security for the lenders (investors). However, the financial position of the guarantor need not be strong and/or may deteriorate after the guarantee is given, which may impair the ability of the investors to obtain payment from the guarantor.
Risks associated with failure to refinance and additional financing
If additional capital is needed, it may be difficult for the Project Owner to raise additional financing if there are multiple pledges. Potential sources of finance may be deterred from lending money if there are a large number of collaterals. In addition, if a project does not go according to plan, the Project Owner often finds it difficult to obtain additional financing in the first place. This may lead to the project not being completed and/or the Project Owner becoming insolvent.
Risk of lower return on early redemption
For some Loans, there may be an option for the Project Owner to redeem the Loan early, which may result in a lower total return to the investor than if the Loan and interest had been repaid on the budgeted repayment date
Risks associated with the inability to assign a simple promissory note
The loans are based on simple promissory notes that cannot be transferred or pledged. This means that there is no possibility for the investor to sell his Loan, which implies that the invested capital is tied for the duration of the Loan
Interest rate and option return risk
If market interest rates change, fixed income investments may become less attractive as investment vehicles if alternative investment options offer higher yields. Market interest rates are also very difficult to predict in the longer term.
Risk associated with maturity
Credit risk is more difficult to assess for a long term loan compared to a short term loan. Most risk factors are amplified by the maturity of the Long Term Loan compared to the Short Term Loan.
Income from a property project is generated primarily through a positive operating result, an increase in value or by selling the property on the market. However, there is a risk that the project owner acquires or invests in less attractive projects, resulting in high vacancy rates, low or non-existent value appreciation or that buyers cannot be found. Factors affecting commercial success include location, condition, financing, market, interest rates, time of year, supply, development, skills and experience, subcontractors, regulatory approvals (e.g. local plan and planning permission), etc.
Risk related to lack of history
Many project owners have no or limited history, which makes the risk assessment difficult as it is harder to draw any conclusions about the Project Owner's audited annual reports, financial strength, ability to pay, willingness to pay, tax payments, general maintenance, etc.
Risks associated with competitors
As Project Owners operate in a competitive market with many strong players, there is a risk that the Project Owner lacks sufficient resources and skills to access attractive property acquisitions and projects with good return opportunities. Insufficient skills and limited resources may negatively affect the commercial prospects of the Project.
Risks associated with (lack of) financing
The project owner is often dependent on external parties for possible final financing and refinancing, as well as for access to construction credit. The Project Owner is thus dependent on banks and/or mortgage institutions' assessment of the market, the project, the Project Owner, etc. in order to obtain the necessary financing to complete its projects.
As certain Investments involve long-term ownership of properties in order to generate income, there is a risk that operating results may be adversely affected by changes in property operating costs for, for example, heating, cleaning, water, electricity, property taxes, fees, insurance, administration and other maintenance. If costs increase, operating profit may be adversely affected by reduced income, for example due to increased vacancy in the property, or that income may not increase at the same rate as costs. A worse than expected operating result may negatively affect the return potential of a project.
Risks associated with construction and regulatory approval
The Project Owner and its contractors may encounter construction problems during the production of properties, which may result in increased costs for the Project Owner. Construction risks may arise, for example, in relation to commissioning, contract negotiations, construction engineering, cost budgeting, weather conditions, geotechnical assessments, geography and planning and logistics.
There are also risks associated with obtaining the necessary regulatory approvals if the Project Owner does not obtain the necessary approvals (e.g. local plan and building permit) or these are appealed.
Fluctuations in market prices can increase the cost of a construction project, for example in terms of building materials, staff and hiring contractors. This can affect a construction project's ability to be completed on time and on budget.
Project owners may acquire properties in different geographic markets or be focused on some specific geographic markets. How a particular market has developed historically is no guarantee that this development will continue, which means that supply and demand may develop differently in different markets or within the same geographic market. A negative development in a market or a worse development compared to comparable markets may have a negative impact on the profitability and financial position of the Project Owners.
Many times a Project Owner is dependent on a third party for production and construction. The Project Owner thus runs the risk of counterparties not fulfilling their obligations, which in turn can affect the project's prerequisites. Possible risks include production failures, delays and insolvency. Any advance payments to a contractor who subsequently goes bankrupt entail a risk of the Project Owner itself becoming insolvent.
Some Project Owners own a property or project together with several other actors. There is therefore a risk that disagreements or conflicts may arise between the parties, that the parties may not respect their obligations towards each other or that the project may become dependent solely on the financial position of one party. Disagreements and non-fulfilment of obligations may adversely affect the ability of the Project Owner to, for example, complete construction, dispose of the property or operate the business in an appropriate manner.
Smaller Project Owners often rely on one or a few key people whose skills and knowledge of the business are essential to the Project Owner's continued development and management. These individuals can be both key employees and owners with significant influence, whose interests may not always align with those of investors. In addition, the operations of the Project Owner or its subsidiary may be adversely affected if, for any reason, one or more key persons are unable or unwilling to be associated with the Project Owner.
The project owner always assumes an environmental risk when acquiring property. If toxins or similar substances are found, which give rise to clean-up requirements, this may entail significant costs. The project owner also risks being held liable for environmental damage that occurs on the property.
Risks associated with litigation
Legal disputes and litigation may arise to which a project owner is a party. The risk is that such disputes may turn out in favour of the other party, resulting in significant costs for the Project Owner.
Risk of loss of reputation
If for any reason a project owner is the subject of negative press coverage or the like, it may affect his or her ability to do business. This may result in difficulties in completing construction projects or in letting vacancies in constructed properties and adversely affect the Project Owner's ability to pay investors.
If the Project Owner's customers run into financial difficulties or for any other reason fail to pay on time, this may affect the Project Owner's ability to meet its obligations to investors.
Risks associated with concentration
For smaller project owners, the business is usually concentrated on one or a few projects, which entails an increased risk as a result of the low diversification of the portfolio. The occurrence of an adverse event that negatively affects one or more projects in the portfolio may affect the Project Owner's and/or the Group's results to a greater extent than if a similar event were to occur in a larger company with a more diversified portfolio.
Risks associated with valuation
The value of one or more properties or projects in the Project Owner's portfolio may be impaired as a result of, for example, changes in market conditions or impairments related to the condition of the property. If the value deteriorates, it may be difficult for the Project Owner to sell the property at a profit or raise new financing if the property cannot be used as collateral, which could potentially worsen both the financial position of the Project Owner and the security of investors.
Risk of liability
All ownership carries responsibility. For a project owner, the property may be damaged by fire, water damage or other cause. In addition, Project Owners may, through negligence, cause damage to persons or other property and cause environmental damage, for which the Project Owner may be held liable. Lack of insurance cover may also result in unforeseen costs. Liability or other responsibility for such damage may also arise in the case of personal injury and damage to other people's property or responsibility for cleaning up environmental damage. Each of these risks could have a material adverse effect on the business, results of operations and financial condition of the Project Owner.
Interest rate risk
Developments in financial markets may affect market interest rates, which may result in increased interest costs that could adversely affect the Project Owner's return prospects and financial position.
A Project Owner may be exposed to fluctuations in exchange rates, for example, if the Project Owner operates in other countries or if some of the counterparties with which the Project Owner works operate in other countries. Fluctuations in exchange rates may therefore affect the Project Owner's results and financial position.
Cyclical and disposal risk
As some projects are dependent on realising sufficient value growth to achieve budgeted return targets, there is a risk that cyclical fluctuations will reduce overall demand, which may lead to a fall in property prices or a reduction in the number of potential buyers. There is also a risk, independently of the economic cycle, that the Project owner may not be able to find buyers due to mispricing, changes in infrastructure, political decisions, etc.
A project's payment obligations in connection with investments, as well as amortisation and interest costs, require good liquidity. If a Project Owner does not have sufficient liquidity to meet its payment obligations, the ongoing operation, financial position and performance of the Project may be adversely affected. Regardless of the quality of the property and the Project, such liquidity shortfall may lead to insolvency and bankruptcy.
A Project Owner may, upon acquisition of land or a project, acquire a company or property that may give rise to liabilities and contain assets that adversely affect the Project Owner's financial position.
Changes in laws and regulations, including tax, property, corporate or otherwise, may affect the Project Owner's ability to continue as a going concern, which may materially affect the Project Owner's financial position and ability to complete projects and repayments.
Risks associated with early project stages
Many projects are at an early stage, which increases the level of risk as the uncertainties are more numerous and with greater potential impact. Examples of such uncertainties are i) lack of credit decision from bank or other source of finance, ii) short, medium and long term financing, iii) lack of building permit, local plan or other regulatory approvals, iv) lack of contract with contractor, v) lack of contractual basis, e.g. purchase agreement, lease contracts, which are legally binding and/or have an actual real economic value, vi) lack of overview of how the market will look or develop when the project will be sold, completed, refinanced, etc.