One of the oldest equity crowdfunders in the real estate space has turned peer-to-peer lender.
Crowdahouse launched in the UK in 2012 as an equity crowdfunding platform for real estate transactions, allowing private investors to take a stake in the ownership of a property. The platform is now changing tack, re-launching as a pure peer-to-peer lender for property transactions.
Crowdahouse claims to be the first mover in the equity crowdfunding real estate space. The model was initially supposed revolve around a fund structure called the Crowdahouse Pioneer Fund – a Zopa-like means of funneling peer-to-peer investment into property-backed deals. But the reservations of the FCA back in 2012 drove the platform’s Co-Founder Peter Lane away from that model. Mr. Lane explained:
“We wanted to protect our Members' interests as investors, which would have been impossible. We’ve witnessed the explosive growth of property crowdfunding in particular and with most of the founders of today's platforms having been original Crowdahouse Members and inspired by our innovation, we feel the time is right to re-enter the market, but with a revised model.”
That revised, debt-oriented model is now live. The platform has re-launched with a £500k loan listing, the purpose of which is to refinance an apartment block by the name of Pullman House. The deal carries an advertised return of 10% per annum, over a 9 month term. The loan is secured with a first charge over the Pullman House property. Borrowers are also seeking money via the Crowdahouse site for the purchasing and refurbishment of a property, and for the purchase of a residential buy-to-let property.
Crowdahouse will of course require a different set of regulatory permissions to conduct business as a peer-to-peer lender, and we must assume that the platform is one of the 114 companies that are seeking full authorisation from the FCA.
Real estate has been a sizzling hotspot within the alternative lending world in recent times. UK leader LendInvest has lent £365m to date, including £170m in 2015 alone, equating to an annualised year-to-date growth rate of 173.38%. The equity portion of the real estate equation has demonstrated a much more gradual rate of growth, and Crowdahouse appears to have recognised that disparity. On the driving logic behind the platform’s restructuring, Mr. Lane said:
“With equity-funded property transactions, the issues surrounding joint ownership, management and exit are highly complex. We fear there will be severe investor disappointment in the future from equity based models."
“Our hands on experience in both residential property and financial services has enabled us to remove the key problem areas of crowdfunding, making the investment decision much more straightforward.”
Join AltFi for its third annual Alternative Income Forum, exploring closed-ended funds (investment trusts) specialising in generating an income using alternative assets such as specialist finance, P2P lending, direct lending, asset leasing and more. Hear from the leading investors and fund managers in this rapidly growing market.