KEY RISKS - Real Estate

Disclosure and Risks Warning
Regulatory Disclosure:

FracAssets (DIFC) Limited (FracAssets) is fully regulated by the Dubai Financial Services Authority (DFSA).

RISK WARNING: Investments in property and unlisted shares carry a risk. Your capital may be at risk and you may not receive the anticipated returns.

Investment Risk Warnings:

Investments in fractional property do not reduce or remove any of the risks that you would face while directly investing in a residential property (i.e. without a mortgage). However, depending on the time of your exit and shared ownership structure, various additional risks may be established.

We suggest that you diversify your portfolio across multiple properties, locations and currencies. This will protect you from excessive exposure to any one property or location that could incur issues such as tenant default or any other problem specific to that property that impacts valuation.

1. Income

1.1 The gross rental income estimates provided by FracAssets are based on third-party information. FracAssets does not take any guarantee for the above estimates. It may be that the actual rent secured might be lower than these estimates.

1.2 Moreover, it is possible that rental income could cease completely for certain periods. Also, from time to time, vacancies can be expected to arise in the operation of real estate assets. In case of payment default by a tenant or sizable vacancies, the investors will experience a reduction in the cash receipts and cash available for distribution to them.

  • Investment in real estate is speculative, the market value of the property can reduce significantly and we do not guarantee any rental income.
  • The estimates are based on past performance and current market conditions, which cannot be regarded as an accurate indicator of future results.
  • The real estate market can experience a downturn affecting your property valuation and your capital value can become negative also, there is no assurance or guarantee of capital.

1.3 Achievement of rental and capital returns will depend on a range of factors including the property asset as well as other micro and macro-environmental factors of the economy.

1.4 The valuation of your property or FracAssets portfolio can be affected by several factors, such as an underlying value of the property or a problem with the property that will need to be funded from future rental income. Economic, political and legal issues can affect your investments as they would on other asset classes. Any future downturn in the real estate market could materially adversely affect the value and income generated from property investment. Investors are to individually assess and establish their level of comfort with this risk from the outset. In the event, an operator ceases to carry on its business, investors may lose a part or their entire capital money, incur costs or experience delays in the investment being wound up.

2. Ownership of shares

2.1 Investors do not directly own the property, instead, they own a share in another legal entity (SPV) ‘Special Purpose Vehicles’ that owns the property. As this entity is not listed or traded freely, it is likely to be an ‘illiquid’ investment; that is, it may be difficult to sell these shares because of the lack of investors willing to buy such shares. So the investor must be prepared to commit to investing for the full investment period.

3. Liquidity

3.1 Real Estate investments are ‘illiquid assets’; that is, they cannot be easily sold. At the end of the investment period, it may be difficult to sell the property, which could result in a delay in investors receiving their capital or in the property being sold at a loss.

3.2 There can also be instances where there may not be anyone willing to buy your investment at a price that you deem reasonable (or buy it at all). In such a scenario, you will have to wait until the end of the investment term for an exit. Even at this point, the timing and ability to exit will depend on the completion of a transaction to sell the underlying property. This transaction could take several months or we can take a call to hold and not sell. You can exit by secondary transaction of selling your shares to someone else.

3.3 In some cases, there may be government restrictions on the sale of a property to foreign owners, which may restrict the range of potential buyers.

3.4 Investors are required to note that the use of credit or borrowed monies to invest on the Platform creates greater risk. For example, even if the value of Investment declines or becomes zero, the investor will still need to meet their repayment obligations with respect to the monies borrowed.

3.5 We or any of our associates, employees, founders do not provide any investment advice or constitute a representation that any investment strategy or recommendation is suitable or appropriate to an investor’s individual circumstances or otherwise constitutes a personal recommendation. All information is provided to help you make your own informed decisions.

3.6 Investors should not rely solely on the information published or presented on the Website and should perform personal due diligence or consult with an independent third-party advisor prior to making investment decisions.

Custodian Account:

FracAssets holds a separate account for Client Money with (the Bank). While the Bank is responsible to FracAssets for the safe-keeping of the client money, it does not have any direct relationship with the clients. Hence, FracAssets acts as an intermediary between the Bank and the client’s money. FracAssets has done due diligence of the Bank’s custodial systems, controls and standards and they seem to be secure and fit to hold the client money on our behalf.However, in case of any micro or macro reasons the bank defaults, FracAssets will not be held responsible for the same.

FracAssets will perform due diligence in connection with the election, appointment and periodic review of the bank (other than a central bank) where the Client Money will be held. However, we shall not be responsible for any defaults or omission on the part of such banks.

Clients of FracAssets are subject to the protection conferred by the DFSA’s Client Money Provisions and therefore:

This Money will be held separate from Money belonging to FracAssets; and in the event of the Authorised Firm’s insolvency, winding up or other Distribution Event stipulated by the DFSA, the Client’s Money will be subject to the DFSA’s Client Money Distribution Rules.

Interest on Client Money is not payable to you as a Client of FracAssets.