A. PREAMBLE
The terms in this document – in particular the terms beginning with a capital letter – have the same meaning as the terms defined in the Terms and Conditions.
Any subscription made by the User is made at the sole risk of the User. By making a subscription, the User expressly declares that it is aware that he/she/it is participating to the fundraising of a Project, which carries certain risks. Foxstone and the Sponsors do not perform any verification of the suitability or appropriateness of the subscription made by the User with the experience, knowledge, financial situation and investment objectives of the said User.
Users who contemplate subscribing to a Project shall take into consideration – in addition to the information contained in other documents such as a prospectus – the risk factors mentioned below. Each risk factor may have a negative impact on the Project, the Sponsor’s activity and its financial situation (including financial income) and the investment made by the User.
The list of risk factors below is not exhaustive. Foxstone does not provide financial, tax or legal advice to the User. From a Swiss tax perspective, a natural person carrying out real estate transactions may be considered to exercise an independent lucrative activity (professional trader of real estate), which implies in particular a different tax treatment. Foxstone hereby expressly recommends that the User consults a legal, financial and/or tax advisor within its tax jurisdiction before subscribing to a Project. Moreover, Foxstone expressly reserves the risks mentioned in any issuance prospectus or other ad hoc risk factors specific to the relevant Project.
B. GENERAL RISKS
All Projects listed on the Website are related to real estate property and therefore carry on the risks associated with an investment in real estate property (see the non-exhaustive list indicated under B.1 below), whereas only specific Projects are structured with an investment instrument, which may imply additional associated risks (see the non-exhaustive list indicated under B.2 below). Furthermore, as the Website and part of the Projects are run through the internet, specific associated risks may also be applicable when using the Website and communicating with Foxstone through electronic channels (see the non-exhaustive list indicated under B.3 below).
B.1 Risks linked to real estate property
1. General
In the case of existing buildings and real estate developments, the User is exposed to risks linked to an investment in real estate such as attractiveness of the location, decrease of the rental incomes, real estate market fluctuation, interest rate fluctuations at local, Swiss and international levels and changes in Swiss regulation and taxation.
In case of a real estate development, the User is exposed to additional risks (to the risk linked to a direct investment in an existing real estate property). Given that the Sponsor may own or control the parcel (land) or real estate development project, the User is also exposed to the risk in relation to the Sponsor such as its solvency and/or ability to develop the real estate project until completion.
2. Rental income
The User’s recurring revenues on existing buildings consist essentially in rental income. The rental revenues may decrease in the future based on several factors such as non-payment of the rent by the tenants, vacancy rate (taux de vacance), reduction of the rent due to change in supply and demand, the reduction of the interest rate, invalidity of the lease agreement (or of specific clauses), rent reduction requests and other factors. The non-payment by one or several tenants of his/her rent under the lease agreement for one or several months as well as the vacancy rate may affect the User’s ability to pay interests and/or reimburse a mortgage to the bank. The wording used in the lease agreements – including as it relates to rent indexing (indexation des loyers) – may be unclear, incomplete or subject to interpretation so that the ability of the delegated property manager to enforce a rental income’s claim (or not fully) under the lease agreement may be hindered.
3. Valuation of the real estate
The valuation of a real estate property depends on numerous factors and is made on hypothesis based on past values and performances as well as observations of the market subject notably to subjectivity in the estimated valuation. Therefore, the estimated valuation of a real estate property may vary. The estimated valuation happens at a specific date whereas the real estate property sale’s price (or parcel) is determined depending on supply and demand at the time of a contemplated sale. Therefore, one shall take into consideration that the estimated value at a specific day does not correspond to the real estate property sale’s price.
4. Force majeure
Force majeure and natural disasters events such as earthquakes, storms, war or terrorist events or sabotage may negatively affect the value of an existing real estate property or a real estate development project.
In the case of an existing building, these events may affect the User’s ability to pay interests and/or reimburse a mortgage to the Bank.
In the case of a real estate development project, these events can affect the Sponsor’s solvency and its ability to pay dividends, interests and/or reimburse the nominal to the Users.
5. Environmental Protection Act
Swiss law provides for specific regulation on polluted sites according to the Environmental Protection Act of October 7, 1983, and its implementing ordinance on polluted sites of August 26, 1998, which requires specific measures to be undertaken in presence of a polluted site. In such circumstances, capital expenditures may be necessary, which can affect the Sponsor’s solvency and its ability to pay interests and/or reimburse the nominal to the Users.
6. Renovations
Unexpected or expected renovations or other repairs on the real estate property may affect the rental income and consequently the User’s ability to pay interests and/or reimburse a mortgage to the Bank.
7. Maintenance and repairs
Regular maintenance, foreseen or unforeseen repair and renovation costs may occur and affect the returns on an investment. Specific repairs and renovation may require substantial investments, which would delay the returns on the investment. It cannot be excluded that, depending on the type of repairs or renovations, no return whatsoever be distributed. Once owner of the real property, the User shall assume the financial risks in relation to its acquisition, and may be asked to pay for such maintenance and repairs, as well as for other bills in relation to the real estate.
8. Legislative developments and re-classification
In Switzerland, real estate investment is regulated by federal, cantonal and communal regulations and laws in the areas of tenancy, land use planning, construction, environment, purchase, tax and purchase of real estate by persons living abroad (Federal Act on acquisition of real estate by persons abroad of December 16, 1983), which may change in the future.
In particular, the land use planning may be re-classified, which can affect the value of the real estate property. The real estate property can also be subject to compulsory expropriation in case specific conditions are met (in particular prevailing public interest).
B.2 Risks linked to the investment instrument (co-investment or mezzanine debt)
The investment via an investment instrument may be made via a standardized debts (bonds issued on the basis of a prospectus) or co-investment (by buying shares of a share corporation).
When subscribing to an investment instrument (co-investment or bonds issuance), the User is also exposed to the risks mentioned under section B.1 above. In addition, it is exposed to the risks in relation to the investment instrument.
1. Swiss regulation
In case of co-investment, the number of investors shall be limited to a maximum of 20 investors and the conditions of such co-investment are subject in particular to Article 2 para. 2 let f CISA and Article 1a CISO. In particular, the investors shall be in a position to manage their financial interests themselves and their rights shall be set out in the constitutive document of the entity.
In case of mezzanine debt, the issuance of debt is made on the basis of a standardized debt issuance (bonds issuance), including a prospectus complying with Swiss laws. Pursuant to Article 2 para. 2 third sentence of the Swiss Banking Act of November 8, 1934 (BA) and Articles 5 para. 3 let. b of the Swiss Banking Ordinance of April 30, 2014 (BO), standardized bonds issued on the basis of a prospectus complying with Article 1156 of the Swiss Code of obligations are not considered as deposits under the BA.
2. Credit and default risks
The issuer of shares (co-investment) or bonds (mezzanine debt), including the Sponsor, can get into financial difficulties and in bankruptcy proceeding, including making it incapable of payment of the dividend (in case of shares), or interests and reimbursement of the nominal (in case of bonds). The User is aware that in case the Sponsor is in bankruptcy proceeding, the User may lose all its investment.
3. Limited liquidity
Non-listed shares of companies (co-investment), non-listed bonds (mezzanine debt) are limited liquidity markets. Neither shares of companies nor bonds on the Website are subject to an organized secondary market. Therefore, in particular there is no guarantee whatsoever that the User who subscribes to such investment instruments finds an investor interested in buying one or several shares or bonds.
4. Market volatility
The price at which investment instruments, such as shares of companies or bonds, may be sold is subject to several factors – such as the interest rate’s volatility and the Sponsor’s financial situation – that can negatively affect it.
5. Absence of guarantee
The shares of a company and bonds may have no collateral or other kinds of guarantee whatsoever, unless provided in the relevant documentation (including in the prospectus, as regards bonds). In particular, there may be no mortgage or other guarantee on the real estate property to the benefit of the Users.
B.3 Use of internet (including the Website), User Account and emails
1. Internet and accessibility of the Website
There are specific characteristics, constraints and risks related to Internet use which may lead to a lack of access to the Website, including due to disruption of network operators or internet access providers or network congestion. Foxstone shall not be responsible for damages resulting from such lack of access to the Website.
Internet use may also imply a lack of privacy and the attention of the User is drawn on the privacy policy which forms an integral part of Foxstone’s Terms and Conditions and describes the processing of the User’s personal data on the Website.
2. User Account access
It cannot be excluded that third parties gain access to the Users’ User Account and Users should not provide information allowing access to their User Account to third parties to reduce this risk. Foxstone shall not be responsible for all activities that occur under their User Account.
3. Communications by emails
Communications by emails may be intercepted, altered, or lost. Foxstone disclaims all liability in respect thereof.
4. Trojans, worms and other viruses
It cannot be excluded that the Website is infected with Trojans, worms and other viruses, as well as programs that allow downloading of information, and there is a risk that the User and/or the User’s IT infrastructure could be affected by such programs through the use of the Website.