Michael discusses how CrowdProperty serves quality lending opportunities, their quest to continuously innovate and their partnership with St Basils charity.
Q: CrowdProperty was one of the first specialist property peer-to-peer lending companies to be established. What separates CrowdProperty from competitors?
A: CrowdProperty is the UK’s leading specialist property project online lending platform, changing the game of property project finance. Property professionals have for decades received poor service from traditional funding providers, especially in terms of ease, speed, expertise and access to decision makers, all of which are pivotal to our proposition. CrowdProperty’s lending is focused on the SME property developer market, whose contribution to housing supply has fallen from 30% to 10% in the last 10 years – it’s a critical segment for supplying much needed UK housing stock and the crux of the issue in the broader matter of housing under-supply in the UK. In our 2019 survey, the largest ever conducted amongst small- and medium-sized enterprise property professionals undertaking property projects, 42% (by far the largest factor) said the biggest barrier to building more homes was funding.
CrowdProperty exceptionally efficiently matches the demand (quality property professionals undertaking quality property projects) and supply (retail/institutional investors) of capital for value-creating residential property projects, delivering a better deal for all – borrowers, lenders, the under-supplied UK housing environment and spend in the UK economy. Our unique, highly efficient and in-house developed leading-edge technology, coupled with uniquely disruptive disintermediation of the broker channel and deep asset class expertise curating lending opportunities enables us to deliver a better deal for all, with an end result of more homes being built by SME developers and much-needed spend in the UK economy on labour, materials and services. The unique direct to property professional brand and route to market that we have built brings superior economics, superior underwriting from direct due diligence and superior service/retention from direct relationships and a very powerful SME property project/professional data set, with direct applications for finance running at £2bn p.a.
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 also represents the leading experience of the relevant asset class of any platform founding team in the market which has proven itself with a 100% capital and interest payback track record through over 5+ years of lending. We’re not only property finance by property people but – precisely because we’re property people – we’re right at the frontier of developments in the property market. We offer the full suite of short-term finance packages and as experts who stay at the very cutting edge of property market trends and have the deep understanding of the market, we’re open to fund any property type, construction method, tenure type or deal structure – including Modern Methods of Construction and Joint Ventures.
There are some in the market that are first and foremost an online, or peer-to-peer lending platform – the critical thing in lending is asset class expertise as a primary factor and then it’s about sourcing the capital. Too many overlook this fundamental aspect and therefore don’t understand the pains, problems and risks sufficiently – you’re only a lender if you deeply understand the risks, mitigate them and crucially get the money back. Otherwise you’re a charity without a cause.
The business operates with an experienced, talented team of 32, with all functions in-house to develop lasting and sustainable capabilities and complete control. What’s more, being based in Birmingham our fixed costs are considerably lower than London and there is a less competed talent pool on both the tech and property areas of our business, enabling us to have a larger team and thereby a far more robust business than London-based alternative finance players.
We also have a clear ‘lender of first resort’ positioning – disrupting traditional bank and non-bank sources of capital for the SME property professional market. We offer thoroughly market benchmarked ‘total cost’ pricing to attract direct applications of the order of £2bn p.a., and then win that business with exceptional speed, service and expertise. That ensures we serve quality lending opportunities, not those rejected elsewhere.
Internal efficiency and value chain disruption enables us to deliver inflation smashing returns for our retail lenders of 7%-8% from quality property projects, safeguarded by The CrowdProperty Shield: rigorous due diligence, first-charge security and unparalleled property expertise.
Having been elected to the board of the Peer-to-Peer Finance Association (P2PFA) as the only property project lender and more recently becoming a founding member of its successor, Innovative Finance’s 36H Group, we are front and centre to input on policy and regulatory matters and promote the benefits the sector is delivering; including bringing choice, competition and transparency to the lending and investment markets. We take a very strategic approach to the sector, building powerful elements of differentiation, a brilliant team/culture, a well-resourced but sustainable cost base and absolute focus to build a world class, long-term, strategically advantaged business. We’re building a 10-, 20-, 30- year lending business with sustainable competitive advantage, robust expertise-led lending and healthy economics as the foundations for realising the exceptional potential for CrowdProperty.
Having raised £2.1m in equity capital to date, CrowdProperty has grown lending by 5.5x and revenue by 5.9x in the last two years despite the overlay of political and market uncertainty. This is reflective of how well we are solving the fundamental pains in the market, especially on the borrower side of the marketplace. Furthermore, the business is now profitable and investing to scale to the potential of lending £1bn per year, which it is uniquely positioned to achieve, with institutional capital commitments to date of £100m to be deployed, complementing retail capital.
Q: Can you share more insight into the technology behind CrowdProperty and how you use technology to pair investors to borrowers?
A: Our highly innovative and market-leading tech, data, analytics and data learning tech platform, alongside a human expertise-driven approach is disrupting the entire property funding value chain, both disintermediating market participants and taking quality, institutional market share of the SME property project funding market. The critical element to our business is balancing the tech, data and analytics in not only matching the capital but also extremely efficiently and effectively assessing project finance applications across all dimensions and automating the entire workflows of the business.
The CrowdProperty platform supports every internal and external element of the business. Our purpose-built platform was and is developed in-house against a market environment of expensive/cumbersome traditional lender IT systems, white-label commodity platform software and offshore third-party development. This ensures significant competitive advantage through customer needs-led prioritisation, rapid speed to market, absolute control and future-proofed in-house capability development.
The tech platform also enables us to effectively disintermediate the property finance broker channel, bringing economic and strategic advantage across many dimensions leading to a scale of direct applications for finance that nobody has achieved in the UK property market. Having purpose-built everything in house, the platform allows exceptional economic efficiency, service excellence and scalability: from a current position of a team of 32, we know we can deliver five-fold the property lending with just 50% more staff – proving the exceptional scalability of our systems, thanks to the investment in developing a bespoke leading tech platform, purpose built for exactly our proposition.
Our unique, highly efficient and in-house developed leading-edge technology, coupled with uniquely disruptive disintermediation in matching supply and demand of capital and deep asset class expertise curating lending opportunities enables us to deliver a better deal for all – borrowers, lenders and the UK by economy unlocking much needed housing supply and spend in the economy on labour, materials and services and has been widely recognised:
Q: How do you see technology evolving at CrowdProperty?
A: Our quest to continuously innovate is never fulfilled. One-third of our ever-growing team 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. This has already delivered the largest non-brokered origination in the industry and the funding of over £150,000,000 of property, adding £80,000,000+ value to UK housing-stock and funding £50,000,000+ of spend in the UK economy on labour/materials/services, helping to reverse the trend of critical housing supply from SME property professionals. Further advancement across all elements of the proposition will further our strategic advantage having built the best SME property project lender in the market with the most scalable and strategically advantaged lending business model, capable of assessing billions and funding hundreds-of-millions-of-pounds of property projects per year with a lender of first resort, high quality lending positioning.
Q: You have partnered with charity St Basils. Can you give us insight into what this partnership involves and aims to achieve?
A: As a proud, Birmingham-based business (albeit lending nationally), we have been bowled over by the great work St Basils does to support over 5,000 young people (16 – 25 year olds) each year who are either homeless or at risk of homelessness. This is a cause close to our hearts and aligns with our mission to support SME developers in building more Great British homes (we’ve now funded the development of almost 1000 homes worth more than £150m).
At any one time there are over 450 young people living in St Basils’ 34 supported accommodation schemes which see over 1,500 youngsters every year. St Basils has a full range of prevention, accommodation, support and engagement services as well as services which aim to ensure young people develop the skills and have the support needed to move on successfully.
We have already taken part in several fundraising initiatives, such as Walk to Work (with the team walking over 1,000 miles) and The Big Sleep Out, and will continue to work closely with St Basils in future – raising much need donations for the charity as it continues to help disadvantaged young people across the West Midlands, to tackle youth homelessness and to support homeless young people in getting back into education, training and work.
Q: Where do you think the industry is headed in 2-5 years?
A: In any sector, structural cost advantage brings strategic advantage. As leading online direct lending platforms who are exercising best practice in building strong, rigorous, robust, specialist and purpose-built systems and processes that deliver such structural cost advantage vs traditional sources of lenders (for example vs banks with retail networks, legacy IT systems, large workforces, expensive offices, regulatory cost of capital and cost of equity), this advantage will play out in a better deal for both sides of the marketplace and therefore these platforms will thrive. This is just one of the strategic principles we are building into CrowdProperty, which coupled with the data sets, tech efficiency, deep asset class expertise and value chain disruption will give us enduring advantage and are key reasons why we remain laser focused on what we are doing to build a world-class property project lending business. We have a phrase in the business that is ‘You don’t see Tiger Woods playing much tennis’ – a relentless focus on building competitively advantaged expertise brings about the very best proposition in the market, for everyone.
CrowdProperty is the UK’s leading specialist property project online lending platform, exceptionally efficiently matching the demand (quality property professionals undertaking quality property projects) and supply (retail/institutional investors) of capital for value-creating property projects, delivering a better deal for all – borrowers, lenders, the under-supplied UK housing environment and spend in the UK economy.
Actual property development and investment experience lies at the heart of the business meaning hands-on, expertise-led due diligence and loan monitoring. Lending is focused on the SME property professional market, a key segment for supplying much needed UK housing stock, which is poorly and inefficiently served by traditional funding sources. CrowdProperty funds property professionals undertaking any sort of property project (including auction purchases and bridging), structuring the perfect funding product and doing so with greater speed, ease, certainty and expertise than anyone in the market. As property people providing property finance, we intimately understand the needs of property professionals and serve them with passion and expertise and have now built the best property project lender in the UK market.
CrowdProperty is authorised and regulated by the FCA, is an HMRC approved ISA / IFISA manager and is a founding member and only property development specialist platform in the Innovate Finance 36H Group (and formerly the only such platform on the board of the Peer-to-Peer Finance Association). CrowdProperty became the first and only property development/bridging P2P lender to become Brismo Verified, independently validating CrowdProperty’s market-leading performance, showing significant outperformance of Brismo’s UK P2P Index.
Read more about alternative finance, peer-to-peer lending, crowdfunding, property and CrowdProperty on the CrowdProperty Blog including a series of 40 articles on these exciting hot topics here.
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