By Oliver Smith on 12th September 2019
New CEO Warren Bath tells AltFi about his strategy for the property platform.
Property Partner launched in 2014 with an ambitious plan to create a “stock exchange for residential property” and democratise investment in the UK housing market.
The company raised over £27m in equity finance from some of London’s most prestigious venture capitalists, including Index Ventures, Octopus Ventures and Dawn Capital.
However, in July the company announced a shake-up both of management with the departure of CEO Marshall King after only a year in post, and in business models with the introduction of a raft of new fees which knocked the value of its £141m property portfolio.
Last week newly appointed CEO Warren Bath (pictured) spoke to AltFi exclusively about the headwinds Property Partner has faced since 2016 and his plans to shore up the loss-making business.
In the wake of the funding Property Partner’s headcount would swell to over 50, with a technology team of 16 at one point.
Unfortunately Gandesha’s £15.9m fundraise for the company would be his largest as CEO, two years later he stepped down.
Property Partner’s assets under management grew from £45m just after the EU referendum to £141m today, however since the referendum capital gains and rental yield have been harder to come by, leading to a plateau in overall growth.
Today Property Partner’s full-time team has fallen to just 12, and Bath tells AltFi that he plans to reduce headcount further over the next year.
“My aspiration is to reach break-even, which requires a dramatically reduced burn rate,” he said.
“But, based on these changes, Property Partner will be cash generative in 2020.”
In 12 months time, the CEO expects his company to have around 7 full-time staff.
Part of the sharp reduction in headcount comes from what Bath says is the ‘completion’ of Property Partner’s development—i.e. the stock exchange tech which underpins the business has now been built.
Along with the aforementioned new fee structure, Bath believes that these changes will resolve Property Partner’s “uneconomic” cost base.
The changes haven’t gone unnoticed by Property Partner’s 10,000-strong active investor base.
Several of the company’s more outspoken customers rallied against the fee structure, calling Property Partner underhanded for imposing the changes on existing investors and punitive for smaller investors.
“We never wanted to remove smaller investors,” says Bath, responding to the criticism.
“But we had to acknowledge the reality that [smaller investors] do have a cost to serve.”
In the weeks since the changes, the CEO remains resolute adding that: “less than 1% of our customer base has made actual complaints.”
Although he admits they have had “discussions” with many more customers.
In hindsight Bath admits the way Property Partner handled the announcement wasn’t perfect, bundling it with his promotion to CEO.
“Had circumstances allowed, we would have liked to give more notice,” he says.
So what kind of business will Bath be left with?
Looking ahead Bath is resolute that Property Partner will not “move away from the ethos we started with”.
His ambition is still to foster that ‘stock exchange for residential property’, but the CEO admits things will move slower now that Property Partner isn’t fueling its growth via VC cash.
“We will continue to launch new properties, but the rate will slow, and we’ll be more selective.”
“Plus we have a little bit of rebuilding of trust to do with our customers,” he says.
With Property Partner approaching its 5th anniversary, the first properties it listed in 2014 will be offered for investors to decide whether they should sell up and cash out.
The CEO is clear that this is a “critical moment” for the company.
“So my first priority now is to drive performance of our existing 110 property portfolio,” says Bath.
“We want to get into the routine of returning capital to investors and investing.”
“Growth is my second priority.”
UPDATE 12-09-2019 - An earlier version stated that Property Partner had upwards of 70 employees and had raised £22.4m in venture capital, these figures have been corrected.