Vertical Farming investment (Abu)

I would also like to add that Abundance are offering 13 prizes ranging from $500 to £5000. First prize £5,000 Second prize (2 x winners) £2,500 Third prize (10 x winners) £500 depending on your investment until  30th April 2020. I know it's a bit of a gimmick but you know I've been investing in green projects for over 20 years now and at times it's felt like I'm banging my head on a brick wall. I've also been told capitalism won't get us out of this mess we are making of this chemical soup we walk around in. However I think they're moments when the penny drops and people begin to wonder, of course this war could end tomorrow and the price of oil and gas drop but the stuff is not going to last for ever. I was recently told that at $1.50 a barrel of oil you could profitable dill in Antarctica that's how crazy some people think. Of course I'll be careful checking these green projects before I invest has should you but the elephant in the room has not gone away and it's starting to knock the furniture over. 

So, I think the proposition in terms of the project and what they are trying to achieve looks interesting and a way forward in food production that I'd like to support.

However, on reading the detail, I think there is some financial structuring of this deal that gives 'On Farm' the option to pay much less that the headline 9% interest (its IRR, I know). Here is my thinking:..

- On a £1,000 capital investment, the 6th monthly interest is £35.60 and this only starts after 18 months. 
- The amount of interest paid each period does not reduce (even though capital has been repaid), so at the start of the loan term investors are earning much less interest as a % of capital than in the latter parts of the loan term
- When Phase 1 is complete, the project is expected to generate £15m / annum of revenues. This leads me to believe that by Year 3 ( when they can exercise early redemption), they will be in a very strong position to do so
- They have an early redemption option from 1st May 2025, which if they invoked would mean they pay a further 6months interest upto October 2025.
- On £1,000 capital then, just 5 payments of interest would be made (5*£35.60) = £178 interest for lending over 3 years, so would be roughly 5.9% effective interest earned / year - rather than 9%

Grateful for thoughts on this - it seems as if the initial 18 months of no interest, and the the interest being backloaded to end of term might be structured to allow this early redemption option while advertising a 9% return at launch

While not the same, this reminds me a little of 'United Downs Geothermal' investment a few years ago, where they took investors money ( our investment was essential to securing Gov and European grants) and then redeemed early and having to pay just 2%).

I have just invested myself, £5 in this and another new offer for North London Council.
£10k is a bit beyond my means but I like that with Abundance you get the same return if you invest £5 or £50,000.

Return of capital is more important than return on capital?

On further analysis of the detail and offer doc I have now found the following paragraph:..

"Early repayment option: From 1 May 2025, we may have the ability to exercise our option to

repay you early. If we do so, we commit to paying you an amount

of additional interest such that you receive the originally indicated

rate of return on your capital invested, 9%, plus a further six month

interest payment."

Perhaps my concerns above were unfounded, I've asked Abundance to confirm, but if paragraph above is correct then this investment looks more attractive again.

EDITED: Good news, reply from Abundance is positive:.. "In the event OneFarm takes up the option for early repayment, when eligible to do so, the Early Redemption Fee has two parts. In the first instance, they must pay an amount that means that investors' return is equal to the originally stated rate of return (9% IRR). They must then also pay an additional 6-month's worth of interest as a 'penalty' effectively. So in such a scenario your overall return would effectively be higher than the headline return on offer."