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Chicago Social
Housing ProgramInvestment Memorandum
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Our company
ethos is summed
up in one
simple phrase,making money,
while doing good
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Contents
Executive Summary 4
Social Housing Program Overview 8
Investment Strategy 10
Strong Rental Cashfow 12
Housing Choice Voucher Program 14
Fair Market Rents 16
Why Invest in Chicago 18
About Us & Our Partners 20
Why should I Invest Now? 21
Buying Process & Returns 22
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Executive Summary3 Year Social Housing
Program (SHP) with18% Net Return per
annum and a 5%
bonus on redemption
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100
95
90
85
80
75
70
65
60
55
502006 2007 2008 2009 2010 2011 2012 2013
Source: Clear Captital Home Data Index
Relative
IndexValue
U.S. National
Home Prices Historical
U.S. National 1 Year
Home Prices Forcast
The Social Housing Program (SHP) bond
launches in early 2012 with express objective
o re-housing up to 2,000 amilies in the
Chicago area.
Over the 3 year period an investor will receive
returns equal to 18% per annum, paid every
6 months, plus up to 105% o the ull amount
invested upon redemption.
The SHP is a Socially Responsible Investment
(SRI) as our main objective is to help provide
sae, clean and decent housing to either the
very low or low-income amilies in the Chicago
area. On each sale made we also donate $25 to
Kiva which helps to ght worldwide poverty.
The US housing market has been on adownward path since it reached an all-time
high in late 2006 early 2007. However, ater
plummeting over 50% in some areas the
consensus is we may have nally ound a
bottom to the market. The graph below shows
that the vast majority o the drop in prices
occurred between mid-2006 and early 2009.
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Whilst the property prices have dropped,
oreclosures have skyrocketed orcing many
thousands out o their homes.
This in turn has increased the demand or
good rental properties and this has been
urther compounded by the banks in the US
keeping a very tight rein on mortgage nance.
This restriction o credit is orcing not just
those that have lost their homes into the
rented sector but also rst time buyers. This
perect storm has created a once in a
lietime opportunity in the US housing market.
The 3 year social housing program bond
has been designed to allow both private and
institutional investors an opportunity to benet
rom these circumstances. Returns o 18% perannum are available. This is asset backed and
secured upon the property held and managed
by us.
All unds are held in a segregated escrow
account by Chancery Solicitors who will hold a
1st lien foating charge over the entire property
portolio, which in the event o non-payment o
the interest, will crystallise into a xed charge
with ull rights o repossession.
This oer o investment originates outside the USA and is
being made under regulation s o the securities act 1933.
The bonds have not been registered under the US Securities
Act 1933 and may not be oered or sold or resold in the
United States or to any US residents.0%
2%
4%
6%
%o
fActiveLoans
Dec-05
4.66%
Dec-05
0.48%
Sep-11
4.18%
Sep-11
8.09%
Foreclosure
Delinquent
Jan-10
10.97%
8%
10%
12%
1995
-01
1995
-06
1995
-12
1996
-06
1996
-12
1997
-06
1997
-12
1998
-06
1998
-12
1999
-06
1999
-12
2000
-06
2000
-12
2001
-06
2001
-12
2002
-06
2002
-12
2003
-06
2003
-12
2004
-06
2004
-12
2005
-06
2005
-12
2006
-06
2006
-12
2007
-06
2007
-12
2008
-06
2008
-12
2009
-06
2009
-12
2010
-06
2010
-12
2011
-06
Total Delinquent and Foreclosure Percent by Month
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Returns of 18% per
annum are available.This is asset backed
and secured upon
the property held and
managed by us.
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8
3 Year Social Housing
Program starts inChicago 2012
Social Housing Program Overview
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Our company acquires distressed property,
typically 2-4 unit multi dwelling houses in both
West and South Chicago. Ater a comprehensive
reurbishment process we let these properties to
US amilies under the Housing Choice Voucher
Program, ormerly known as Section 8. This
allows the company to achieve high rental
yields that are paid and underwritten by the
US Government.
In some cases the company may sell
a proportion o its portolio to help accelerate
growth and use leverage where appropriate.
There is a minimum initial investment o
10,000 and subsequent purchases at 5,000.
The annual returns are 18% o the suminvested which is paid bi-annually. The start
date is exactly 6 months ater the nal date o
subscription. This allows or administration,
property acquisition, reurbishment and rental.
The nal redemption payment is paid ater
3 years and can be up to 105% o the original
investment.
A proportion o the prots are placed in a
sinking und to ensure that all current and
uture bond obligations can be met.
All unds are secured against the properties
held in the portolio and kept in a segregated
escrow account with the Chancery Solicitors,
who are based in Westminster, London.
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10
Investment strategy
to help re-house 2,000
families in Chica o. The
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We ocus on multi-unit dwellings which contain
between 2 4 apartments. All properties are
bought direct rom US banks or via Foreclosure
sales and are reurbished to a high standard,
which includes new kitchens, bathrooms,
windows and wooden foors.
Yields achieved are sucient to deliver the
necessary dividend returns to the Bond
investors whilst allowing the company to
continue to grow.
Throughout the three year term, we will actively
manage each property to maximise the returns.
This will include a mixed strategy o buy & hold,
buy & sell at the most appropriate times.
We expect to undertake more property dealingin the rst 18 months whilst prices are
particularly low, which will help to accelerate
growth beore switching to a longer holding
strategy as the redemption dates approach.
The table below shows the Housing & Urban Development* (HUD) departments agreed rent payable in
Chicago or 2012.
One-Bedroom Two-Bedroom Three-Bedroom Four-Bedroom
$853 $958 $1,171 $1,323
We can acquire a 2 unit property or as little as $30,000 - $35,000 and reurbish it or approximately
another $30,000. A 2 unit property with one 2 bed and one 3 bed apartments will produce a rentalincome o $25,548 per annum. I we take an acquisition and reurbishment cost o $65,000 we will
achieve an un-leveraged yield o 39.3%.
Another option is to acquire, reurbish and sell. The above example could be sold or $100,000 and still
produce an un-leveraged yield o 25.5% per annum or a buy to let investor.**
The gures achieved are even better on a 3 unit dwelling. In this example the property has one 2 bed
and two 3 bed apartments. A typical acquisition and reurbish cost would be approximately $80,000.
The rental income generated by this property would be $39,600. This would provide an un-leveraged
yield o 49.5% or an un-leveraged prot o $78,400 i we sold at a cap rate o 25%.
The sale o just one o these 3 apartment properties generates enough cash to cover all the Bond interest
payments and the nal redemption payment. (based on an investment o $80,000, see below.)
Bond Investment $80,000 Bond Interest @ 18% per annum $14,400
Property Type 3 Apartments 8 Beds Total Bond Interest Payable $43,200
Rental Income as per FMR $39,600 Redemption Payment @ 105% $84,000
Cap Rate 25%
Sale Proceeds $158,400 Total Repaid to Bondholder $127,200
All o the returns shown above are un-leveraged.
The Fair Market Rent (FMR) is set by the Housing & Urban Development department and is paid direct
to either the investor or the investors agent, thus guaranteeing a certain level o rental income.
All unds invested are secured with a 1st lien charge against the property portolio and we also have a
sinking und which acts as urther insurance against the non -payment o investor returns.
* The HUD is a US Governmental Department
** Investors who wish to buy property outright should contact us direct
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Strong rental cashfowThe US homeownership
rate has fallen to around
6 million homes since
2007 and this hasincreased the demand
for good quality rental
properties.
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1970
62
64
66
68
70
62
64
66
68
70
1975 1980 1950 1990 1995 2000 2005 2010
Homeownership Rate: United States
Source: Cesus Bureau/Haver Analytics
1 People who have suered rom a oreclosure still need somewhere
to live and thereore their only option is to rent.
2First time buyers cannot get a mortgage to buy a property so they
are orced to rent instead.
3 Voluntary Deault, whereby a regular borrower hands back their
keys because they are in a negative equity position and they decide
they would be better o renting.
As more people are orced to become renters, the demand or rental
property increases and this creates upward pressure on rental prices
as can be seen in the graph opposite.
There has been a steady and inexorable rise in the price o rental
income across the US since way back in 1983.
0
20
50
75
100
125
150
175
200
225
1983
1983
1983
1983
1983
1983
1983
1983
1983
1983
1983
1983
1983
1983
1983
Source: www.housingbubble.jparsons.net
U.S House Prices vs Owner Equivatlent Rent
Owner-equivalent rent index
Home price index
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14
What is the Housing Choice Voucher Program?
Most of the properties
will be let to new
prospective tenants
under the Housing and
Urban Developments
(HUD) housing choicevoucher (HCV) program,
formerly known as
Section 8. This secures
the long term future of
the company as all rental
income is underwrittenby the US Government
and paid direct to us.
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The housing choice voucher program is the
US Federal Governments major program or
assisting very low and low-income amilies, the
elderly and the disabled to aord decent, sae
and sanitary housing in the private market.
Since housing assistance is provided on behal
o the amily or individual, participants are able
to nd their own housing, including single-
amily homes, townhouses and apartments.
The participant is ree to choose any housing
that meets the requirements o the program
and is not limited to units located in subsidised
housing projects.
Housing choice vouchers are administered
locally by public housing agencies (PHAs).The PHAs receive ederal unds rom the
U.S. Department o Housing and Urban
Development (HUD) to administer the voucher
program.
A amily that is issued a housing voucher is
responsible or nding a suitable housing unit o
the amilys choice where the owner agrees to
rent under the program. Rental units must meet
minimum standards o health and saety, as
determined by the PHA.
A housing subsidy is paid to the landlord
directly by the PHA on behal o the
participating amily. The amily then pays the
dierence between the actual rent charged by
the landlord and the amount subsidized by
the program. Under certain circumstances, i
authorised by the PHA, a amily may use its
voucher to purchase a modest home.
TheRentSubsidy
The PHA calculates the maximum amount o
housing assistance allowable. The maximum
housing assistance is generally the lesser o the
payment standard minus 30% o the amilys
monthly adjusted income or the gross rent
or the unit minus 30% o monthly adjusted
income.
All rental payments are paid direct rom the
US Government department HUD into our
managing agents bank account, where it is
combined with the tenants contribution beore
being orwarded on to us.
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The Fair Market Rent is the 40th percentile o
gross rents or typical, non-substandard rental
units occupied by recent movers in a local
housing market.
40th percentile: The 40th percentile is that
point in a distribution o numbers at which
40% o the numbers are less than or equal to
it and 60% o the numbers are greater than or
equal to it. In the set o numbers {$395, $458,
$486, $517, $675}, $458 would be the 40th
percentile. The 40th percentile is similar in
concept to a median; the median is the 50th
percentile.
Gross rents: Gross rent is the sum o the rent
paid to the owner plus any utility costs incurred
by the tenant. Utilities include electricity, gas,
water and sewer and trash removal services but
not telephone service. I the owner pays or all
utilities then gross rent equals the rent paid to
the owner.
OneStrikePolicy
Unlike the UK, where unruly tenants seem to
repeatedly get re-housed, this does not happenin the US under the HCV programme thus
protecting our investment. I the tenants do not
pass any o the routine inspections or ail to pay
just one monthly rent, they are given 30 days to
rectiy the problem and i this isnt done they can
be evicted.
Any tenant evicted rom the HCV Section
8 home cannot get back into the scheme
anywhere in the US. Under the scheme theHCV Section 8 payments can cover rom
70% up to 100% o the tenants rent.
Obviously tenants try hard to not lose this
support thus ensuring the property remains in
good condition and in most cases treating it as
i it were their own.
HowHUDMatchestheFMRDefnitionWithDierentDataSources
Element 1990Census AmericanHousing
Survey
RandomDigitDialing
Survey
PublicComment
Gross Rent Recorded by census Recorded by AHS Respondents indicate
utilities they pay or and
HUD estimates monthly
costs rom local housing
authority data
Varies. I the comment
contains an RDD, HUD will
estimate utility costs using
local housing authority
data. Otherwise, HUD willestimate rom 1990 census
Recent mover Moved in past 15 Months Moved in past
18-22 months
Moved in past
12-15 months
I public comment does
not contain recent mover
inormation, HUD will
estimate rom 1990 census
Public Hous ing Adjus ted HUD based on AHS Eliminated by HUD rom
AHS inormation
Eliminated in survey Varies . HUD can est imate
rom AHS data
Built in past
2 years
Eliminated by Census Bureau in
extract.
Eliminated by HUD rom
AHS inormation
Eliminated in survey Varies . HUD can est imate
rom 1990 census
Substandard
units
Census extract excludes units with
major decencies HUD makes
urther adjustment based on AHS
HUD uses AHS denitions
o serious problems
No separate adjustment* Varies. HUD makes
adjustment i needed
Seasonal un its Cen sus extr act excluded Excluded by HUD rom AHS
inormation
Eliminated in survey Varies
Atypical Census extract excluded Excluded by HUD rom AHS
inormation
Eliminated in survey Vaires
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Why invest in ChicagoChicago has one of the
worlds largest and most
diversied economies,
a gross regional product(GRP) of $500 billion
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DiverseEconomy
Chicago is home to more than 400 major
corporate headquarters, including 27 Fortune
500 Headquarters. Rated #1 Large US
Metro or Economic Diversity by Moodys
Investor Services, Chicago is a key player in
every economic sector rom risk management
innovation to manuacturing to inormation
technology to health services.
TradingPost
The most distinctive aspect o Chicagos
nancial services community is also among
its oldest. The citys derivatives exchange
community, which started with commodity
utures trading at the Chicago Board o Trade in
1848, established the city as a global nancial
centre. To this day, even though the trading o
derivatives is conducted on an ever-expanding
international scale, Chicago arguably remains
the geographic centre o global derivatives
trading in terms o markets, scale and talent.
Over $3 billion in global derivatives trading
volume, nearly 2X the trading volume o New
York
Chicago-based Options Clearing Corporation
clears all US options contracts worth nearly
$2 trillion in 2008
Chicago utures and options exchanges
collectively dominate exchange-based
derivatives trading, with 51% o exchange-
based derivatives trading in the U.S.
Since 2000, the volume o global derivatives
trading has increased rom a little over 2 billion
contracts traded to more than 17.4 billion;
Chicagos exchange community accounted or
18% o the global increase and 48% o the
U.S. market increase.
GrowingEconomy
Chicago continues to grow: total trade
surpassed $160 billion in 2010 (up rom $95
billion in 2004). Chicago is top-ranked or
economic potential among major cities across
the world and in 2010, World Business Chicago
identied more than 230 medium-sized new
& expanding acilities announced, under
development or completed in the metro area,
representing a total o more than 14 million
square eet and nearly $2 billion in economic
development activity. In August 2010, Inc.
Magazine included 202 companies rom the
Chicago region in its annual list o the 5,000
astest-growing companies in the U.S., placing
Chicago 4th among metro regions or number
o Inc. 5000 companies; the city itsel ranked
second with 101 companies.
Source: www.worldbusinesschicago.com/data/economy
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About us and our partners
Our company has been established to take
advantage o the dislocation in the US housing
market and to provide both private and
institutional investors seeking above average
asset backed returns, the opportunity to benet
rom this situation.
The management team has over 40 years
combined property experience and currently
manage in excess o 1,000 properties across
the Chicagoland area.
All property acquisitions, sales and title
insurance services are managed by the Chicago
Title company, who have been in business or
160 years and have branches across 40 states,
making them one o the largest specialist title
and escrow companies in the US.
UK Based law rm, Chancery Solicitors act as
Escrow agent, and hold 1st lien charge over theproperty portolio until all payment obligations
have been ullled.
Our realtors regularly sell in excess o $25m
worth o property per year in the Chicago area.
Please see details below o our trusted advisors
& partners based in both the USA and UK
USA
Chicago Housing Authority Chicago USA.
Lawyers Berg & Berg, Attorneys at Law,
Chicago, USA
Accountants Steinberg Associates,
Chicago, USA
Bank JP Morgan Chase, New York, USA
Property Goldtree Realty Inc, Chicago, USA
PropertyManagement
Acorn Property Management, Chicago, USA
Title&ClosingAgent Chicago Title Company.
UK
ProductAdvice:Clive Wolman, Barrister atLaw, Lincolns Inn Fields, London
Accountants:Baker Tilly, Chelmsord, Essex
Bank Barclays
Solicitors Chancery Solicitors, London
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Why should I invest now?
Limited number o bonds available.
To take advantage o the exceptionalreturns without any o the hassles o directownership.
Guaranteed returns paid every 6 months.
Short to medium term. Returns andredemption payments are concluded ater3 years.
Asset backed Investment.
UK Based Solicitor holds a foating 1st liencharge over the entire property portolio untilall bond payments have been disbursed.
75% rule. The amount o bondholders moneyinvested cannot be above 75% o the value othe property portolio.
Extra security provided by solicitor heldsinking und.
Assured above average returns o 18% perannum.
Assured Capital growth o 5%.
Secure exit strategy in place. Fully SIPP/SASS compliant structure.
No need to register or pay US Taxes.
No need to open a US LLC or bank account.
Secure alternative investment managed by oneo the US largest title insurance companies.
Property management, trading anddevelopment team in place with over
a combined 40 years experience.
No worries about maintenance orreurbishment issues.
No void periods.
Low entry level, just 10,000.
Flexibility. More bonds can be bought orjust 5,000 each.
The ultimate armchair investment. Purchaseyour bonds and thats it. Sit back, relax andwait or the returns to arrive.
A once in a lietime opportunity to benetrom low property prices and high rents in
the worlds largest economy.
Bonus 5% interest payable to early bird
investors.* See table below.*Investment must be made before April 30th 2012.
Fixed Annual Returns $50,000
Yr118%
$9,000
Yr218%
$9,000
Yr318%
$9,000
Redemption
@ 105%
$52,500
Total
$79,500
AnnualEquivalent
19.66%
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Buying process
Complete and sign the Bond Application orm
Enclose relevant Anti-Money Laundering
documents (2 orms o ID, one showing your
current address which must also be dated
within the last 3 months and one which must
be a picture ID such as a current Passport or
Driving Licence)
Sign either Sophisticated Investor (SI orm)
or High Net Worth Investor (HNWI orm)
Forward a minimum o 10,000 to
Chancery Solicitors
Bond Certicate Issued
First returns received 6 months rom the end
subscription date o November 30th 2012.
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