We’ll discuss two Zephyr X loan notes offering in this post: their flexi bond and Cheetam Hill loan note.
Zephyr X is a developer of commercial real estate with an emphasis on healthcare, build-to-rent, and student housing.
The firm invests in projects across the UK in those sectors.
Every investment undergoes scrutiny to make sure risks are reduced, there is enough room for growth, and an exit strategy is in place, according to Zephyr X.
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Zephyr X Loan Notes Investment
Zephyr X Loan Note Flexi Bond
This investment option is available in US dollars, British pounds, and euros. It gives a 5% incentive and a 10% compounded interest.
The senior secured bond is due five years from the date of investment. However, it can be withdrawn every year on the anniversary of the investment. With the flexibility of this annual exit option, investors can take their money out if they need liquidity or choose to lower their risk.
Since real estate assets are used as collateral for the loan, which can serve as cushion in case of default.
The real estate sector’s performance, however, could have an impact on earnings, especially if the market drops or the underlying assets depreciate.
Zephyr X Cheetam Hill Loan Note
This opportunity involves the development of a high-end project with 237 build-to-rent apartments spread across 23 stories.
The three-year loan note bears a 15% coupon per year that’s due at maturity. Investors seeking a faster return in comparison to the 5-year Flexi Bond could find its shorter term appealing.
This offering is also accessible in USD, GBP, and EUR currencies.
Similar to the Flexi Bond, this note has asset backing and is senior secured, offering some protection against default. The fact that the coupon is only paid at maturity, however, can turn off investors looking for steady income.
Profit will also be impacted by the Cheetam Hill project’s viability, which hinges on finishing and leasing or selling the 237 apartments.
Since the performance of the real estate industry directly affects the result, delays, cost overruns, or market downturns could have an impact on the investment.
Pros and Cons of Zephyr X Loan Notes
Benefits of Zephyr X Loan Notes
- Consistent returns, which are particularly alluring when interest rates are low.
- When compared to government bonds or conventional savings accounts, loan notes frequently have greater interest rates.
- If the borrower defaults, the collateral lowers the risk of loss.
- In case of a liquidation, investors holding the senior secured loan notes will be given priority over other creditors.
- When these loan notes are added to an investment portfolio, they can increase portfolio diversification.
Risks of Zephyr X Loan Notes
- These are subject to downturns since they are sector-specific.
- The collateral’s worth may not be sufficient to satisfy the entire debt in the wake of a borrower default, even when the loan is secured.
- Since the loan notes are not traded on open markets, it is challenging to sell them before they mature.
- The fixed interest rate of the loan notes may lose appeal if market interest rates increase.
- The principal investment and interest payments may be forfeited if the borrower defaults on the loan. Firms or initiatives operating in high-risk industries or with little track record are more vulnerable to this risk.
- The high fixed interests offered are risky, so extra caution is advised.
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