Spanish Property Growth (UK) Ltd

Spanish Property Growth (UK) Ltd (SPG) is offering by personal invitation only the opportunity to invest in the rapid growth potential of the Spanish property market in the Costa Blanca area of southern Spain.

In the past 12 months property values have risen in excess of 20% in this region and our many builders with whom we have regular contact, indicate that this is a trend that shows no sign of abating.

To take maximum advantage of the growth potential all properties are bought off-plan, mostly with a completion period of approximately 12 months. Buying off plan has major advantages financially, among these are:

• Prices are lower and are fixed
• Taxes are lower
• Extras are cheaper to install
• Payment schedules are more flexible

SPG will use its considerable knowledge of the area and connections, to ensure that only properties with the best growth potential and letting opportunities are acquired. With this in mind there may be opportunities to purchase resale properties if the prices are attractive enough.

Working very closely with top quality estate agents and highly respectable builders, SPG can offer an unrivalled opportunity to obtain a sustained growth on your investment with minimal risk.

Many people have an interest in buying a property in Spain as the number of visitors to exhibitions held by a large number of companies throughout the whole of the UK can testify. However very few visitors to these exhibitions actually take Inspection Tours and even fewer visitors actually buy. The ratio runs at roughly 1 IT per 2 exhibitions with a 50% conversion rate. The average number of visitors to an exhibition is 15 couples, which means that only 1 in 60 visitors actually buy.

Of the other 59 some are timewasters with no intentions to buy and are there for a day out. The remainder do not buy for a whole variety of reasons but according to our research 70% of these individuals have sufficient funds to partake in this scheme.

Effectively that relates to available cash of £4,000,000 (or €5,600,000) in a 12 month period from a company holding just 40 exhibitions per annum. That represents an additional 28 property sales per year from this source alone.

The reasons these 70% do not buy are many but the general reasons (not in any particular order of significance) are:

1. Scared of the commitment
2. Not enough money for the deposit of 50%
3. Do not wish to take a mortgage
4. Are not certain if their deposit is safe. Hence the questions like "What if the builder goes bust..."
5. Do not find a property suitable

This scheme removes all of these reasons, but more dramatically opens up the market to large numbers of individuals who have no interest or nothing more than a passing interest, in Spanish Property ownership. These people are those who are looking for a safe home for investments.

Properties Profile

All properties will be on or near the coast and or golf courses. The beaches are superb in Costa Blanca with the majority having blue flag status and the area is also fast becoming a golfers' paradise with dozens of courses, many of them of championship status, all within 40 minutes of the properties.

There will be a mixture of village and town location and all will have a private pool and be close to all main amenities. All facilities such as electricity, water will be installed as a matter of course.

With 2 international airports in the region, no property will be more than 45 minutes away. Alicante offers daily flights all year to all UK regions and flights are both cheap and plentiful.

The main types of properties are:

• 2 or 3 Bedroom individually detached villas with private pool and garden.
• 2 or 3 Bedroom Duplex (Town Houses) with communal pool and garden.
• 2 bedroom apartments with a maximum of 2 storeys, with communal pool. In these cases we will attempt to obtain both upper and lower storeys in each case whenever possible.

All properties will be purchased freehold and will be chosen for

1. High possibility for capital growth
2. Excellent Holiday Letting locations
3. Good resale potential
4. Quality of finish

Each one will carry a full 10 year guarantee.

On completion of the building works we will furnish the property to a very high standard with all modern appliances such as dishwasher, freezer, washing machine and television, DVD and video recorder to enhance the letting potential.

The Area

Costa Blanca is an area unspoilt by high rise package holiday developments. There is a substantial amount of building works in the region, but these are essentially residential properties designed for family living or holiday homes. The area is fertile and full of farmland and orange groves.

The weather is exceptional in the area with an average of just 23 days rain and warm winters where the temperature often reaches 20°C (68°F). Summers can be very hot but the coast is always close at hand.

The holiday season is long and can be year round with January and February tending to be closed month only. Golfers find October, November and March, April and May as the best months to play. Courses are quieter and temperatures are lower making the game more comfortable. Even so daytime temperatures in these months are often higher than the UK in its summer. You can also usually count on it being dry.

There is a huge selection of restaurant facilities in the area and all are of a high quality and very reasonably priced. Anyone who has ever visited Spain will know that eating out can be nearly as cheap as eating in.

The Scheme

Each property will be purchased freehold and the purchase value will include:

1. Construction
2. Freehold Land
3. Pool (if no Communal Pool on site)
4. Legal Cost
5. Spanish Taxes
6. Furnishings
7. Connection to Mains Services

They will be purchased brand new and off-plan with an anticipated build time of 12 months and will usually be mortgage free.

The cost will be fixed upon signing of contract and will be known upon acquisition. The total acquisition cost will be divided into an equal number of shares with 10% being allocated to SPG and the remainder divided equally amongst the investors.

EXAMPLE 1: A 3 bedroom detached villa

This means 2350 shares would be issued at a parity value of £100 per share with a purchase cost of £111 per share. The cost to acquire these shares would be £5,550 per 50 shares, which is the minimum investment.

235 shares would be allocated to the company giving a distribution to investors of 2115 shares. This gives a maximum number of investors of 43.

EXAMPLE 2: A 2 bedroom Duplex

This means 1150 shares would be issued at a parity value of £100 per share with a purchase cost of £111 per share. The cost to acquire these shares would be £5,550 per 50 shares, which is the minimum investment.

115 shares would be allocated to the company giving a distribution to investors of 1035 shares. This gives a maximum number of investors of 21.

The property would be re-valued upon completion and each subsequent year.

Assuming 25% uplift the revised valuation (excluding furniture) would result in a share value of £116 per share.

A profit in year 1 of £5 per share. (cash value for minimum shareholding of £250.)

Assuming a 15% in year 2 uplift the revised valuation (excluding furniture) would result in a share value of £128 per share.

Cumulative profit of £17 per share (cash value for minimum shareholding of £850. A return of 15% over 2 years).

See Appendix 1 below for more detail

When completed and furnished the property would then be available for Holiday Lettings for a 40 week period from March 1st to November 30th each year. Each property would be available for investor usage from December to February at a nominal fee to cover services.

The anticipated rental Income for Example 1 would be £16000 per year gross. Approximately 40% of this would be deducted for Re-valuation, Management and Letting Cost, repairs and renewals and insurances, with the remaining 60% added to the share value. This would therefore enhance the share value further from year 2 onwards.

The following conditions will apply:

1. There will be no cash distribution made.
2. All surplus on Lettings will be held as cash.
3. Property Title Ownership will be held by the company.
4. Each shareholder will have 1 share in a Management company and this Management company will take a charge on the property to ensure that the property cannot be sold without consent.
5. Investors will receive an annual report prepared by the company's auditors, Bishop Fleming, showing the property re-valuation, cash position and revised share value.
6. Any investor can request a re-valuation at any time subject to that investor meeting the full cost.
7. No individual can hold more than 500 shares, (Excluding the company), unless unanimously agreed by all remaining shareholders.
8. Any proposed sale of the property must be unanimously agreed by all shareholders, who hold at least 50 shares.
9. Holders of 50 or more shares will be entitled to use the property for one week in High Season at 10% discount, Medium season at 30% discount or Low season at 70% discount, subject to availability. These weeks if not used cannot be carried forward. The bookings will all be handled on a first come first served basis and full paying bookings will take priority. All bookings will be done via the internet.
10. Any investor can sell his shares at any time based upon the valuation placed upon them by the Company's auditors. It is a condition of the shareholding that such shares must be offered for sale to existing shareholders first. The company must handle the sale of such shares, which it will do free of charge. We would not advise sale in the first year as this will inevitably result in a loss. If existing shareholders do not wish to take up the offer the shares can then be sold to alternative buyers. The company can handle this transaction subject to a commission charge of 2% of sale value.

Company Auditors and Registered Office

Bishop Fleming
19 Portland Square
Bristol
BS2

All investment funds will be sent to and subsequently held in a clients account operated by the company's auditors (above) until it is time to effect the purchase transaction. At this stage no funds can be returned. No shares will be issued until the purchase has actually taken place at which time the share certificates will be forwarded showing the number of shares and the parity value. Initial investments are to made within the UK in sterling.

Once an investor has received the share certificate then shares can be sold. It is however not advisable to sell as there will be an automatic loss unless a potential replacement investor can be found to purchase at the premium price.

The initial investment will be held in the UK in sterling, but once a decision to purchase is made or sufficient investors are secured the funds will be transferred to the Spanish Bankers and converted to euros. Replacement investors will need to transfer funds in euros. Replacement investments must be handled by the company to ensure the correct allocation of shares.

Tax implications

The shareholder is responsible to account personally for all tax liabilities. The company has been set up not to operate at a profit. Book values of the properties will not show revaluations but will be presented in the accounts at cost to avoid any tax liability.

The company will be subject to tax on the profit retained on rentals, but if this situation occurs and is detrimental, then a distribution would be made to shareholders who would then have to account for this as income. This income would be liable to taxation depending upon personal circumstances.

Wherever possible distribution will be avoided to minimise tax liability as distribution will also affect the share valuations.

Sale of shares would be subject to Capital Gains Tax for the shareholder and this must be dealt with personally.

Growth estimate year 1 to 6

This is not designed as an income plan and will not prove suitable for anyone wanting a regular monthly income, though an income can be derived after an initial 2 or 3 year period. One major advantage of this plan is that manipulation of your investment can provide an income stream by selling part or all of the shareholding.