Investment Strategy

The investment strategy of Velvet Bricks™ Investmentsis to work with developers on projects which encompass the full property development lifecycle. This is because when a project goes through a full development life cycle, the opportunities for equity creation are much higher. In order to create equity, investors must understand the lifecycle of property development and level of associated risk/returns at each stage for both themselves and the Developer.

Below are diagrams showing summaries of property development life cycle and the associated risk/reward relationship:

Upside
Maximum investor returns at this stage as Developer needs to generate cash to launch project and in turn offers very attractive pricing
Downside
Extreme risk as building has not even been designed and significant capital required to get involved
Upside
High investor returns at this stage as Developer needs to generate cash to initiate construction and in turn offers attractive pricing (circa 15% below launch)
Downside
Investor cannot see actual building being constructed as yet because construction has not yet begun
Downside
There is virtually no appreciation at this stage unless unit location is in great demand
Upside
At this stage investor can see finished product and be comfortable with what he/she is buying (for many people this visualization factor is important)
Downside
Investor return very low and completely subject to external market forces driving prices upwards
Upside
Since funds required for initial construction are generated at Pre-Lauch, and the construction is now visible to investors, they can be more comfortable investing in a project in progress

Developer Risk Index

High

Medium

Low

Nil

Investor Return Index

High

Medium

Low

Nil

Velvet Bricks™ Investments recommended stage for retail investors considering capital outlay, developer history and risk/reward ratio