By Ryan Weeks on Thursday 20 October 2016
New real estate crowdfunding platform Homegrown goes live, funds first project.
Homegrown, a new platform which allows individual investors to invest in development projects alongside professional and institutional investors, has closed its first deal. The inaugural campaign was a mixed-use development project in London Fields, to which individual investors contributed £20k – a small slice of a much larger deal.
The project carries projected returns of 33.6 per cent, with a target investment term of 24 months. The £20k slice that was apportioned to the Homegrown platform was just one source of funding against a grand total of £38,489,676 in costs – an amount which encompasses the development, sales and financing costs of the project. The project has a projected gross development value (GDV) – i.e. the projected market value of the development upon completion – of a little under £44m. Projected total return to Homegrown investors is £26,723 on the original £20k, and investors are able to see the exact breakdown of how this return is reached on the Homegrown website. But it’s important for investors to remember that these are only projections, and should by no means be treated as a guarantee.
The funding for the London Fields project came from the developer and from a number of professional and institutional investors, which have invested alongside Homegrown investors. In this particular deal, investor equity (including that of Homegrown investors) is senior to the developer’s. But the rub is that the developer alone will be the beneficiary of any profits that exceed those projected in the business plan.
Homegrown investors in the deal will own a share of a newly formed SPV (Homegrown SPV 101 Ltd), which will make an investment into the property development.
For a platform like Homegrown, the track record of developers is a crucial metric for investors to consider. “We only work with established developers and typically on projects that have secured, or are at an advanced stage of planning and financing,” said founder and CEO Anthony Rushworth. “Our team undertakes an independent review of every project which focuses primarily on the developer and their track record, current market information, financial projections and development specifications. We only accept projects and developers that meet our strict investment criteria, which means we reject the vast majority of projects we review.”
The platform’s second deal – a residential development project in South Wales – launched yesterday. The projected annual returns are higher, at 19.1 per cent, over a target investment term of 21 months. Homegrown has access to a £21k slice of the project.
“Investors will receive a share of any profits on exit, once the development is complete and the units are sold,” said Rushworth. “Our investments typically target an exit between 18 and 36 months and in the most cases the developer will aim to sell the majority of units off plan during the build phase.”