thumbnail of Liverpool Community Homes Debenture 2

Liverpool Community Homes Debenture 2

Interest rate 8.0% a year
Term 2 yrs and 6 mths
Total Invested £3.59m
364  investors
Maturity date 28 Feb 2023
thumbnail of Liverpool Community Homes Debenture 2

What does the company do?

Liverpool Community Homes plc is a project company setup by Octevo Housing Solutions Limited (“Octevo”) to finance and build social housing.

Octevo, 100% shareholder of Liverpool Community Homes, was set up in 2016 to identify and develop affordable housing using a business model designed to address the core procurement and funding barriers faced by a number of registered social landlords and some local authorities. Rather than requiring them to take on and fund the predevelopment, planning and construction risks and costs, Octevo would take on these costs and build and own the properties in return for a long term lease that should secure long term rental revenues for Octevo. This model is designed to allow private funding to increase the amount of small-scale, quality affordable housing for long-term social use.

Octevo’s objective is to build quality affordable homes that its registered social landlord or local authority partners will lease on a long term basis. In the case of this development, the leases are packaged up with one registered social landlord and will be effective for 50 years. A registered social landlord must abide by the UK’s regulation of social housing, which includes a cap on the amount of rent it can charge for affordable housing. Once the properties are built, the registered social landlord pays a single monthly rental amount in respect of all the homes and will manage the sourcing of, and ongoing relationship with, tenants (usually individuals and families on local authority waiting lists). It will be responsible for the ongoing maintenance of the homes as well as the collection of rent.

Why did the company raise money?

Liverpool Community Homes raised funding to put towards the construction of properties in its proposed Huyton development, situated in the Liverpool district of Knowsley. The development plan consists of 1 detached and 6 semi-detached 2-bed houses for supported living and 20 1-bed flats for affordable living.

How does the company expect to repay the investment?

The level of affordable rents is regulated by the government and increases are linked to inflation (Consumer Price Index). This way of setting rent is designed to protect the affordability of the homes. Since the rent on these affordable homes is the responsibility of the registered social landlord and in some cases may also be guaranteed by the local authority, the income stream is relatively assured. This predictable, long term, inflation linked income stream is attractive to certain institutions, like pension funds, as it can match their liabilities over time.

Octevo’s model to repay investors is therefore to look to sell the rental income from the properties developed by Liverpool Community Homes (either on its own, or packaged with the rental income from other properties being developed) to a large investor. In exchange for an upfront lump sum, the ‘new’ investor receives the rights to the rental income after costs for the remainder of the life of the lease. This upfront sum would be used to repay investors.

If the company is unable to sell the rental income, the company may instead look to sell the homes themselves with the funds from the sale used to repay investors.

In the event that Liverpool Community Homes, the issuer of the investment, is unable to make the payments of interest or capital repayment due to investors, Octevo Housing Solutions (as the parent company of the group) is obligated to make the payments itself.

How is the company making an impact?

The UK has a shortage of suitable housing and in particular, a shortage of affordable housing available to people on social housing waiting lists. Octevo’s business model is designed to remove the barriers that are constraining registered social landlords and local authorities from delivering the number of new homes needed, and rapidly scale the the access to affordable, and high quality, homes.

In addition, for the properties developed as part of the Liverpool Community Homes project, Octevo has identified a number of measures to significantly reduce the net energy demand of the homes without prohibitive cost which will translate to valuable savings in energy bills for the new tenants. These include ground source heat pumps, solar panels, insulation, glazing and LED lighting.

Architect plans for the Huyton development
Architect plans for the Huyton development

Key terms

Issuer Liverpool Community Homes
Return 8.0% a year
Term period 2 years and 6 months
Start date 1 September 2020
Maturity date 28 February 2023
Capital repayment Lump sum on maturity
Amount raised £3,594,766.87
Return structure

Interest is paid every 6 months with the capital repaid as a lump sum on the maturity date.

Secured or unsecured Secured It is important to understand that security does not guarantee repayment of your investment or returns.
Security package

This investment has first ranking security over all of the assets of Liverpool Community Homes under a package of security documents including:

  • a security agreement (including fixed charges and a floating charge) over all of the assets of Liverpool Community Homes
  • a share charge over the shares of Liverpool Community Homes
  • a security assignment of contractual rights granted by Octevo over certain documents related to the construction contracts for the building of the homes (for example the architects)

Liverpool Community Homes plc has issued another debenture (Debenture 1) which funded the construction of the Northwood property development nearby. Together this results in a larger and more diversified portfolio of properties held by the company. Both debentures are on substantially the same terms. A priority arrangement has been set up such that: the debenture holders that funded the Huyton development will not benefit from the security over the Northwood development assets; and vice versa, the debenture holders that fund this Northwood development will not benefit from the security over the Huyton development assets. Any monies from the enforcement of security over all other assets of Liverpool Community Homes plc (as well as its shares) will be shared on a pari passu basis (ie. proportionally) between holders of both sets of debentures.

Early repayment options

The company can choose to repay the investment at any point from and including 1 September 2022, subject to paying an early redemption fee equal to half of the interest that would have been due between the early repayment date and 28 February 2023.

See the Debenture Deed for details of all circumstances in which the option for early repayment may be exercised.

Documents

Debenture Deed
Download PDF The debenture deed sets out the legal agreement and terms for this investment.

Payment schedule

This table gives a breakdown of what is due to be paid back on this investment, based on an example investment of £1,000.

Payment schedule table
Payment date Capital repayment Interest Total
1 March 2021 £0.00 £39.67 £39.67
31 August 2021 £0.00 £40.32 £40.32
28 February 2022 £0.00 £39.67 £39.67
31 August 2022 £0.00 £40.32 £40.32
28 February 2023 £1,000.00 £39.67 £1,039.67
Total £1,000.00 £199.65 £1,199.65

Updates

These updates tell the story of the investment over its life and include information reported to investors by the company or council behind the investment. The updates are provided for informational purposes only and do not constitute an inducement or invitation to invest. Information provided at the time of publishing may no longer be accurate.

Please read the full update here

The company has provided a note on the work being undertaken to file overdue accounts for Liverpool Community Homes which includes converting from a public to private limited company and a share sale transaction

The previous management team were overdue in submitting annual audited accounts for all three project companies (Merseyside Assured Homes plc, Pax Apartments plc and Liverpool Community Homes plc), as they are legally required to do as public limited companies. This has created the risk of serious actions from Companies House, in particular against us personally as the current directors, so we have sought to resolve this issue with Companies House.

Although we have the bank records from the period that the previous director team were running the business, we have been unable to locate sufficient supporting information to file audited accounts. We have taken advice from accountants and have been in communication with Companies House on this issue. The recommendation was to convert from a public to a limited company so that we can at least submit unaudited accounts by piecing together bank statement information. This should mitigate any serious action against us by Companies House.

The process of converting to a limited company required the approval of our parent company, Octevo Housing Solutions (OHS), and therefore of the administrator of the company, however they were unwilling to undertake the work required. The solution has been to arrange the purchase from OHS of the shares of the three project companies by a shell company owned by a property financing group that is run by one of our directors, Rod Black. The sale is at a minimal value only to cover the administrator’s legal fees. To facilitate this transaction, the share security held by debenture holders is required to be released. Abundance Security Trustee has consented to this on the basis that:

  • There is clearly no current or future value to the shares due to the level of accruing debt in the project companies
  • It enables the current director team to continue in position which is critical to the prospects of recovery for investors
  • We will govern the company in many of the same ways as we would a plc – in particular that we will have two directors at all times and going forward we will submit accounts in the correct timely manner.

Note, the guarantee from OHS will still remain in place despite the share sale.

Please read the full update here

Please read the full update here

Please read the full update here

Following a formal request from a debenture holder, Abundance, as agent for the debentures, is arranging an online meeting for debenture holders.

The meeting is open to all holders of Debenture 2 in Liverpool Community Homes to attend. Details for joining the Zoom meeting can be found below.

  • Date - Thursday, 2nd November, 5pm
  • Link to join - Join here
  • Meeting ID - 827 6360 1474
  • Passcode (if required) - 499851

Please read the full update here

Please read the full update here

Liverpool Community Homes has asked investors in Debenture 2 to vote on a proposal that would allow the company to:

  1. Take out a new loan to fund the work required to complete homes at the Huyton development.
  2. Once complete, look to sell the homes on the open market or sell the income from keeping them as social housing.
  3. Extend the investment until 31 March 2025. Funds from either option above would be expected sooner and would be paid out to investors, however the longer extension gives more time to attempt to recover additional amounts from Octevo to repay any outstanding amount.

The new directors of Liverpool Community Homes believe completing the homes, even with the additional cost of construction and the new loan funding, represents the best route to maximise the amount that is returned to investors. The alternative, selling the developments in their current unfinished state, is expected to return a significantly smaller amount. The proposal sets out the figures and reasons for their recommended approach.

The terms of the investment can only be changed with the approval of investors by voting on a special resolution. In order for the proposal to be accepted, investors holding at least 75% of the debentures must vote in favour.

What do you need to do?

  1. Read the proposal from the company which sets out more details about the plan to maximise the amount repaid to investors.
  2. Read the Special Resolution which is the legal document you are voting on.
  3. Place your vote on the Special Resolution. Please place your vote by 5pm, 26 July 2023.

The new directors of Merseyside Assured Homes have made available a recording of the webinar held on Wednesday (31 May 2023) for those who were not able to attend on the day.

The directors introduced themselves to investors and provided more detail on their backgrounds and motivations for taking on the role, as well as talking through the current status of the Merseyside Assured Homes properties and their proposal.

You can view the recording here (the passcode to view the webinar if needed is: 7&BBA8zR).

Please read the full update here

An investment return from Liverpool Community Homes Debenture 2 was paid today.

Please read the full update here

An investment return from Liverpool Community Homes Debenture 2 was paid today.

An investment return from Liverpool Community Homes Debenture 2 was paid today.

Please read the full update here

Please read the full update here

An investment return from Liverpool Community Homes Debenture 2 was paid today.

Please read the full update here

Liverpool Community Homes Debenture 2 can now be listed on the marketplace for sale by investors.

This investment closed today.

Liverpool Community Homes Debenture 2 opened for investment today.