8.5% p.a. and 25–50% Locked-In Capital Gain on Real Estate — Tell Me How
LUX Capital Partners is offering a way to earn interest on a property-backed loan while building purchasing credit toward a future LUX Property Group property.
The offer pays 8.5% interest per annum on loans of at least AUD $25,000, with a minimum 12-month term. Lenders can receive interest quarterly or elect to capitalise it. They can also choose to convert eligible loan amounts into LUX Property credits with a 25% or 50% redemption bonus, depending on the terms for which they qualify.
Here is how the numbers work. On a AUD $100,000 loan, 8.5% annual interest amounts to AUD $8,500 over a full year, assuming the principal remains outstanding. If the full AUD $100,000 principal qualifies for property redemption, a 25% bonus would provide AUD $125,000 in credits. A 50% bonus would provide AUD $150,000 in credits.
Eligible capitalised interest may also be converted into property credits. If a year’s AUD $8,500 interest qualifies for the same bonus, it would become AUD $10,625 in credits at 25%, or AUD $12,750 at 50%. The applicable agreement determines which amounts qualify.
What does “locked-in capital gain” mean here? It refers to the agreed bonus on eligible amounts converted into property purchasing credits. It does not mean that a property has already increased in market value, and the bonus is not payable as cash. A lender considering this option should distinguish the value of the credits from the future value and performance of any property purchased.
LUX Property Group says that, in many cases, a lender can arrange a written fixed-price agreement for a selected future property. On selected villas, a buyer may instead be able to sign a purchase contract for a specific property and location, then apply eligible credits toward the agreed purchase price when the loan is converted. The property, price, timeframe and credit arrangements would be documented in writing.
According to LUX Capital Partners, the borrowing company holds security over part of LUX Property Group’s Indonesian land and real estate assets, with a stated market value of at least 120% of the amount lent. The specific borrower, security and lender rights are set out in the loan documents. The property credit redemption option is separate from that security.
After the initial 12-month term, a lender may request cash repayment with 120 days’ notice, subject to the agreement. A request to redeem eligible amounts into LUX Property credits can be made with 30 days’ notice, including during the initial term, subject to the applicable redemption conditions.
The offer is available for loan amounts up to USD $10 million, subject to acceptance and eligibility. Lenders should review the signed documents to confirm their interest arrangements, redemption bonus, security and repayment rights.
More information: luxcapital.fund
This article contains general information about an offer by LUX Capital Partners. It does not take into account any person’s objectives, financial situation or needs and is not personal financial, investment, legal or tax advice. Eligibility and availability depend on applicable laws and individual agreements. Lending and property investment involve risk, including delayed repayment or loss. Property credits are subject to their terms and do not guarantee a property’s future market value or returns. Seek independent professional advice before participating.
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