What Is a Collective Investment Scheme (CIS) ?
A CIS is a specialty fund set up by FSA regulated Fund Operators on behalf of developers that enables investors in the fund to participate in the future profits made from a closely defined property development opportunity.

With many developers short of capital and with lenders decreasing their debt levels LTV/LTC creating a CIS fund is a viable alternative source of much needed capital

What Type of Development can CIS be used For ?
In theory, any type of development is allowed - residential, commercial, mixed, land etc with the key constraint being market appetite amongst investors. Is what you are promoting genuinely attractive? Does it offer excellent rewards and controlled risk? Do you have the right credentials? Is it a niche play with a credible exit route?

How Much Capital Can be Raised?
Our recommendation is £5m minimum with typical fund size being £10m—£25m. Capital can be raised and invested in stages towards the target total fund size. Capital raised can be invested to buy either single , or multiple development opportunities. It can also be geared up by using bank debt. The developer becomes the fund’s Asset Manager, makes all investment decisions and can draw management fees from the fund.

What Are the Set Up Costs?
To reduce initial costs and risks to the developer, a CIS fund idea can be partially set up for as little as £8k.
In this case, the Fund Operators will solely advise on the developer’s fund model to verify the target IRR and approve a promotional flyer for market testing to potential investors under FSA regulations.

Full set up fees vary in relation to capital raised, but as a guide, budget £100k for £5m, £150k for £10m and perhaps £200k for £25m. The developer has to provide this capital for fees and take the commercial risk of not raising funds from investors. These fees can, however, be fully recovered from investor funds if and when raised.

How Do We Find Investors?
The developer would be wise to conduct market testing. The fund’s promotional flyer would be sent by email and/or post to our network of

• thousands of IFA investment specialists,
• thousands of investors directly, all known to have an appetite for risk.

An initial budget of £10k—£15k would be necessary. If investors react well to this initial market test, the developer can then move to full fund set up with more confidence that funds might be raised and their seed capital recovered. Clearly, if the fund subsequently goes to full set up, marketing costs will increase, but are all fully recoverable if funds are successfully raised. Fees of circa 5% of funds raised are paid to IFAs.

How Do We Get Started?
Talk us through your ideas. We will set up the Fund Operator and help you prepare the financial model for the fund and get approval for the promotional flyer. We will conduct the market test on your behalf and feedback the results. If all goes well, we will arrange for the full set up of the fund and advise on the appointment of lawyers, Unit Trust managers and tax advisors.

Monyy Property Finance, Paddock House, Old Melton Road, Nottingham. NG12 5QL  enquiries@monyy.co.uk   Tel: 01949 81918  
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