How would you describe the CrowdProperty platform?
CrowdProperty is run by Property Experts – we have incredible depth of understanding of the asset class and the pains that property professionals face when organising finance for their projects. We know because we’ve been there and that is why the three co-founders, with 75 years‘ collective hands-on property investment and development experience, set the business up. This experience has proven itself with a 100% capital and interest payback track record through over five years of lending (since 2014).
There are some in the market that are first and foremost a P2P Platform – the critical thing in lending is asset class expertise as a primary factor and then sourcing the capital. Too many overlook this fundamental aspect, with inexperienced, tech-led teams or experience from other sectors, and therefore don’t understand the pains, problems and risks sufficiently.
Secondly, we have a clear ‘lender of first resort’ positioning – disrupting traditional bank and non-bank sources of capital for the SME property professional market.
CrowdProperty is different because we:
• Have a 100% capital and interest payback track record
• Always take first charge security and only lend on projects with planning permission already in place
• Attract the best quality projects by offering competitive rates plus a swift and excellent service to property professionals
• Originate projects directly, ensuring a better deal for both lenders and borrowers (more on this later)
• Have unparalleled, hands-on expertise, meaning projects are assessed with deep and rigorous specialist property experience. We have funded just 3% of the £2.1bn-worth of applications
• Are the first property development / bridging platform to be Brismo Verified
• Are the only property project platform member of the Peer-to-Peer Finance Association (P2PFA), the ‘top table’ of UK peer-to-peer lending, alongside other sector leaders
• Have proprietary (not white label) technology that has been built, continues to be developed and is managed internally for absolute control over our proposition development
• Have undergone extensive institutional due diligence with commitments from two institutions who have spent months understanding the business to ensure the very best operating and due diligence practices are undertaken by deep experts in the asset class, complementing retail lender capital
• Do not suffer an excessive London fixed cost base by being based in Birmingham, enabling us to invest in deeper expertise, more resource and building the very best lender in the market
CrowdProperty’s unique direct to property professional brand in the market is disintermediating the broker channel for both significant economic and underwriting benefit. The economic benefit comes from both our platform and the borrowers themselves not paying fees to brokers (which also mitigates threats from competitive lenders who may decide to buy market share by paying higher fees to brokers to hit time-period targets).
The underwriting benefit comes from our direct relationship building with the borrower. There is no sales person (broker) in the middle who is only incentivised on successfully closing finance. Our team will speak directly to each borrower – 20, 30, sometimes 40 times – assessing not only the capabilities of the individual and team but also the human motivations of that property professional to complete the project. This also builds a partnering relationship, which opens better communication channels throughout the project as our team will value-add during any challenges faced along the way. This richness in both underwriting and loan monitoring is unprecedented – and is no doubt a contributor to our 100% capital and interest payback track record. This track record and high quality of active loan book is validated by securing major institutional backing after extensive due diligence.
What are the three main advantages for investors?
CrowdProperty’s exemplary, 100% capital and interest payback track record over 5+ years of lending is also supported by a demonstrated perfect recoveries process where projects have suffered difficulties. This is the longest perfect track record, driven by the CrowdProperty Shield of rigorous due diligence, leading hands-on expertise in the asset class and first charge security. This track record and high quality of active loan book is validated by securing major institutional backing after extensive due diligence into our best practices, processes, systems and expertise. Safeguarding our lenders’ interests is a priority and CrowdProperty’s risk assessment is very detailed, curating and pricing loans based on granular quantitative assessment and asset-class-expert human interpretation.
CrowdProperty AutoInvest allows for automatic diversification – this has meant that lenders can automatically pledge to projects (with ‘skip next project’ and cool-off period functionality). This is a product that is constantly evolving having worked with pension providers to enable the feature for pensions and introduced AutoReinvest. Whilst the minimum AutoInvest account investment is £500, lenders can now participate in projects from £50 by requesting that is spread across at least 10 projects, whereas our SelfSelect model is a minimum £500 investment. This may also suit lenders with smaller pots to invest once the FCA’s 10% rule is introduced in December, ensuring that even with just £500 investments can be easily diversified.
CrowdProperty has no lender fees – not on our ISAs, our Pension accounts or our AutoInvest (we cover the administration costs of holding, investing and even transferring funds into and out of your accounts). And we wouldn’t retrospectively apply them on deployed capital, as has happened in the market. The spread CrowdProperty offers is tight enough to be a fair reflection of the risk embodied in the loans: the lion’s share of repayments goes straight to you, the lender. The ethos of the P2P lending industry is to deliver the efficient matching of supply and demand of capital to deliver a better deal for borrowers and investors alike.
What ROI can investors expect?
CrowdProperty lenders receive 7-8% (7.88% average contracted rate in 2019) returns, secured by a legal first charge against the property asset(s), underpinned by deep expertise and rigorous due diligence. We have a 100% capital and interest track record through over 5 years of lending, driven by deep expertise in exactly what we’re lending against, rigorous due diligence and our insistence on first charge security.
Currently the Lender Returns are 9.03% over the paid back loan book (around one-third of cumulative funding). This return is higher than our advertised up to 8% (we offer loans between 7% and 8%) due to a number of loans early on being listed at 10%, a few paying back within the 6-month minimum accentuating the average return and a higher rate paid on the few loans running late during the late period. Through 2016 – 2019, the average actual returns are between 8.17% and 8% with average contracted lender rates between 8% and 7.84% through those years.
Unlike most platforms, we are transparent about the spread on our statistics page and will always be – it’s a key factor to understand about any platform you’re investing in, as that’s often opaque and the best reflection of whether you’re fairly rewarded for the risk that your capital is bearing. Importantly, we clearly show the borrower rate on our statistics page – this clearly shows our average contracted ‘spread’ of 1.96%pts, a crucial metric for lenders to understand as it is ultimately the borrower rate that indicates the risk profile of the loan in a competitive market. An 8% return when the borrower is paying 10% is a clear indication that the platform is efficient and the lenders are receiving a high proportion of the return for bearing the risk; there are instances in the market where lenders may be getting 8% (or less) for loans going out at anywhere from 12% to 15% – borrowers borrowing at that rate are unlikely to have been able to borrow cheaper, which indicates the market’s view on the risk of that loan.
Is the technical platform self-developed or using white label solution?
The CrowdProperty platform supports every internal and external element of the business. Our purpose-built platform was entirely developed and is fully maintained in-house against a market environment of expensive/cumbersome traditional lender IT systems, white-label commodity platform software and offshore third-party development.
The core of our innovative tech build is to:
• Deliver the very highest efficiency in matching supply and demand of capital
• Deliver on our pain-solving proposition to deliver speed, ease and certainty to borrowers
• Provide the very best in data, analytics and data-learning to our property experts to ensure the very best underwriting decision making
• Support relentless improvements in our unique origination route to market
• Ensure paramount security and robustness of the operating platform
Our technology focus is fundamental to delivering world-class results and defensibility in these strategic elements, therefore all our tech development has always been and will always be in-house to cement strategic advantage – building proprietary IP, expertise and responsiveness at the heart of our competitive advantage.
Our quest to continuously innovate is never fulfilled. One-third of our ever-growing team (currently 32) is tech development, spearheading innovative developments for our customer propositions and relentless internal betterment: our systems, processes, data-feeds, algorithms, analytics, data-learning and expertise-driven uniquely disruptive business model are being constantly perfected.
CrowdProperty successfully differentiates itself from traditional financial institutions through our pioneering platform – making investing and borrowing simple, easy and automated for both borrowers and lenders alongside deep asset-class expertise in actually doing what we‘re lending against for decades. Commercially, the business has seen an exceptional rise in traction, validating the power of the CrowdProperty solution to the fundamental pains evident in the sector.
How reliable is the credit rating/credit history data available?
Our market-leading statistics page was recognised in the 2018 Altfi Awards as the runner-up in ‘Best Clarity of Data‘ for the entire alternative finance sector. In addition to using the very best market data, data-learning and analytics for underwriting, we provide detailed data on each and every project listed on the CrowdProperty platform – market leading information available to our lenders to do their own due diligence.
Crucially, we are transparent about the borrower/lender rate spread on our statistics page and will always be – it’s a key factor to understand about any platform you’re investing in as that’s often opaque and the best reflection of whether you’re fairly rewarded for the risk that your capital is bearing. Importantly, we clearly show the borrower rate on our statistics page – this clearly shows our average contracted ‘spread’ of 1.96%pts, a crucial metric for lenders to understand as it is ultimately the borrower rate that indicates the risk profile of the loan in a competitive market. An 8% return when the borrower is paying 10% is a clear indication that the platform is efficient and the lenders are receiving a high proportion of the return for bearing the risk; there are instances in the market where lenders may be getting 8% (or less) for loans going out at 12%, 13%, 14% or even 15% – borrowers borrowing at that rate are unlikely to have been able to borrow cheaper, which indicates the market’s view on the risk of that loan.
As part of our commitment to transparency, we open our loan book – and every cashflow therein – to various market commentators, underlining our complete commitment to disclosure best-practice and independent accountability for the performance of every loan that we originate both historically and going forward. Brismo use a common methodology to compare returns across platforms, with CrowdProperty significantly outperforming their UK index, the ‘Link Asset Services Marketplace Lending Index’:
How is the company financed?
CrowdProperty is based in Birmingham which balances excellent access to talent whilst minimising our fixed cost base – we estimate that our fixed costs are c.55% lower in our current setup vs a central London operation, all of which can be invested in deeper expertise, more resource and building the best lender in the market (at the end of the day, platform lenders will suffer excessive costs bases of platforms either through lower returns for the same risk to cover that cost or through less investment in critical areas of a platform’s operations).
The business is well capitalised having now been through 3 equity fundraises, totalling £2.2m (with many lenders and borrowers as shareholders). We are totally focused on building a profitable business, to reliably and sustainably continue to offer a better deal on both sides of our marketplace.
7) Are you open to international investors?
Any individual can invest with CrowdProperty provided they are over 18, have a UK bank account and have a proof of identity and address within the EU. We accept investors with UK bank accounts that can provide a valid proof of identity and address for these EU countries: Austria, Belgium, Bulgaria, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Croatia, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom, Guernsey, Isle of Man, Jersey, Monaco, Switzerland.
Is your platform regulated?
CrowdProperty is directly authorised and regulated by the FCA and is an HMRC approved ISA manager. We are the only property development platform elected into the P2PFA, the first to be Brismo Verified and we have the most transparent statistics. We have also undergone extensive institutional due diligence with commitments from two institutions who have spent months understanding the business to ensure the very best operating and due diligence practices are undertaken by deep experts in the asset class, complementing retail lender capital.
9) Where do you see your platform in 5 years?
We are building the best property project lender in the market, attracting more and more of the highest quality lending opportunities for the benefits of our lenders. We are building this for the long term – a 10, 20, 30-year business that‘s the very best in the market because of our relentless focus.
We have many plans for developing the platform as we continuously listen to our customer feedback, proactively research customer needs on both the lender and borrower side, build significant proposition developments into our platform and see numerous strategic plays that would benefit our customers.
The CrowdProperty platform is entirely in-house developed. We have proprietary (not white label) technology that has been built, and continues to be developed and managed, internally for absolute control over our proposition development, our purposeful priorities and USPs.
On the lender front, we are relentlessly developing our proposition in conjunction with direct feedback from our customers. CrowdProperty has introduced AutoInvest (recently enhanced with AutoInvest for pension specifc functionality), providing stress-free, easily diversified investing opportunities powered by our proprietary Platform Algorithm. By keeping technical expertise in-house, we benefit from the nimbleness to react quickly to feedback across our marketplace.
For Borrowers, as part of our 57-step underwriting due diligence process, our platform powerfully couples technology-enabled systems, processes, data-feeds, analytics, smart algorithms and data-learning with expert human-brains to make exceptionally fast, superior lending decisions, with complex property project finance offers issued within 24 hours.
We couple market-leading technology (for efficiency) with leading expertise (for effectiveness).
We don’t however announce into the market our developments as they are competitively sensitive… watch this space for some major developments in 2020.
How do you see the competition in the markets you operate?
The main source of competition for quality lending opportunities (as it’s quality origination that’s key for a peer-to-peer lender) is from banks and non-bank lenders funding property projects. There are a few P2P platforms that fund property projects but some are not dedicated property-specialist lenders, focus on lower quality lending, have mixed security propositions, focus on segments of the market we wouldn‘t fund and some even fund their own property projects on their own platform. Additionally, there are a host of very small platforms that cannot offer property professionals the necessary reliability of finance nor have the resource for most effective due diligence. Most have little or no hands-on, real expertise of the asset class they are funding.
Discover more at: www.crowdproperty.com.
Read our perspectives on alternative finance, peer-to-peer lending, crowdfunding, property and CrowdProperty on the CrowdProperty Blog in our series of 40 articles on the future of property finance