The platform uses a fixed price point for all loans.
CrowdProperty launched in 2013 but has taken some time to ramp things up. Today, it has lent a grand total of £22m, with the vast majority coming this year.
Mike Bristow, CEO and co-founder of the platform, has a background in management consultancy advising private equity firms on buyouts and corporate strategy. He invests personally in the proptech sector and has also been busily building a personal portfolio of London property since 2002.
For Bristow, CrowdProperty’s proposition is all about simplicity.
“When we set out we purposefully said that we would endeavour to make this simple. There’s no doubt that over time I think our model will evolve and I think pricing will get more complicated,” he told AltFi in an interview. “But initially our principle was make it simple – make it simple for the borrower make it simple for the lender – and we fixed the single price point on that.”
The price point he refers to is 10 per cent, which is what every single one of the platform’s borrowers pays. Similarly, all of its retail investors buy into loans at an interest rate of 8 per cent.
CrowdProperty originates development loans for residential projects, always with first-charge security over the property. The average loan-to-value (LTV) ratio across the book is 64 per cent. Factoring in both the principal and interest owed on its loans, that LTV falls to 57 per cent. All loans are valued by a third-party RICS surveyor. So far, the platform sports a 100 per cent record in terms of capital and interest being repaid.
Bearing all this in mind, Bristow seems to see 8 per cent returns as something of a steal for investors – ‘relative to other propositions’.
Those investors hand-select the loans they participate in. There is no auto-investment alternative. All loans come with a large amount of supporting information, and CrowdProperty hosts a webinar the night before each project goes live, allowing investors to ask questions of the borrower directly. It usually sees about 100 lenders tune in.
Bristow believes in transmitting full-value to investors by sticking true to what he sees as the peer-to-peer lending sector’s founding purpose.
“We believe in taking everything out, every bit of third-party cost in the process out to get to the true ethos of peer-to-peer lending: matching supply and demand of money as efficiently as possible.”
It’s certainly true that the firm’s pricing structure is straightforward, and you could also make the case that 8 per cent is an attractive return for what’s on offer. But with such square numbers at play, some might feel a little nervous about just how discerning CrowdProperty is being.
Fear not, says Bristow. He stressed that the 10 per cent charge is carefully pegged against competitive lenders in the market, both traditional and alternative.
“We’re not sweeping up the stuff that won’t get funded elsewhere. We’re effectively competing well on interest rate with incumbent supply, and then smashing it on service, speed, etc. Property people love speed and certainty, because they get a better deal and that creates better security for us,” he said.
Simplicity and speed, argues Bristow, is particularly prized in the development finance sector. Banks may be slow to lend to consumers and businesses, but nowhere near as slow as they are to extend funds to developers – especially when those developers are SMEs.
Bearing in mind the government’s agenda to build more affordable housing, the opportunity to support SME housebuilders is a big one for alternative property lenders. Bristow is hoping his fixed-rate model can help him to capitalise.