Company focus: CrowdProperty
In just nine years, CrowdProperty has grown to become one of the largest and most successful peer-to-peer lending platforms in the UK, with an impressive track record of property creation.
Since it was founded in 2014, the property lender has gone on to fund over £720m worth of projects, lent out £334m and paid out £193m to investors in capital and interest. At the time of writing, 3,116 homes had been funded by CrowdProperty.
The platform is currently offering target investor returns of up to 10.5 per cent per annum. Historically, investors have earned an average annual return of 8.02 per cent, despite several years of economic volatility.
Not only that, but the company’s profits have been rising – to the point where CrowdProperty was recently named as one of the UK’s 100 fastest-growing companies with £6.1m in sales, and a three-year annual growth rate of 53 per cent.
“We set this business up as property people ourselves,” says Mike Bristow (pictured), chief executive and co-founder of CrowdProperty.
“And we set it up because there was a pain in the market, i.e. small and medium sized developers were struggling to access sources of capital.
“Since we set up CrowdProperty, we have been consistent and focused over the years, and we are highly concentrated in that sector.”
This laser focus is key to the platform’s success, Bristow believes. He is critical of alternative lenders who move into the property lending space seeking huge profit margins, but don’t have the experience to back it up.
“Building projects can go wrong,” he says. “And if you don’t have deep asset class expertise and if you don’t have the organisation entirely focused on execution delivery, that’s where things will go wrong.
“We have received £11.2bn worth of applications, but we have only funded £400m of these. That shows that we are tough people to get money out of, and that’s vitally important.”
As CrowdProperty approaches its 10-year anniversary, it has an enviable wealth of data, analytics and technology powering its business.
“We built everything ourselves by growing our developer database,” says Bristow. “We’re now able to run machine-learning models to guide our resource allocation to high probability projects and build those relationships and close the loans that we want to close where they score highly on borrower factors.”
The company has 54 employees based in its Birmingham headquarters, and another nine in the Sydney office of its sister company CrowdProperty Australia.
“Nobody in property development is as well resourced as we are,” says Bristow.
“And we are absolutely focused on one thing, property development. That has resonated with our borrowers, so we tend to market on the borrower side as property financed by property people. And we’re delivering on that property promise and that proposition, and that ensures that we get the great quality loans that we want to fund, so we can bring great products to our investors.”
Read more: CrowdProperty hires Mark Davidson as head of loan management
CrowdProperty’s loans are funded by a mix of institutional and retail investors, with the majority of its money coming from the institutional space. Earlier this year, CrowdProperty announced a new institutional funding partnership with an unnamed UK bank, just one week after securing a £15m funding line from the British Business Bank.
Its retail investment base is largely made up of dedicated property investors, and people who prefer to manually choose their investment projects. Bristow says that the platform’s investors “scrutinise the hell out of these borrowers” and are committed to diversifying with a wide-ranging property loan portfolio.
“The average investor on the platform is invested in 74 projects,” Bristow says. “And that’s really important.”
By diversifying across a number of loans, investors can reduce the risk of capital losses. However, this risk is already minimal on the CrowdProperty platform. The company takes a first charge security on every property, which allows it to recoup investor capital should the loan go into default. To date, no investor has made any capital loss from CrowdProperty, and many investors are able to realise both their capital and interest on properties which have gone into receivership as a result of this first charge security. But Bristow doesn’t like to brag about this track record.
“We will see losses at some point,” he says. “It will happen on every platform. That’s why I don’t like people shouting about their 100 per cent track record. That’s really fundamental to good investment practice.”
When loans are repaid later than scheduled, CrowdProperty investors earn a higher rate of interest.
CrowdProperty recently raised its investor returns, but Bristow is wary of hiking rates even higher as it could impact on its borrower community.
“We’re building out incredible tech to enable us to bring more of the best projects to invest,” he says.
“There are countless platforms out there that don’t have a single software engineer, or have outsourced a load of stuff or bought something off the shelf. They are not tech businesses. They sit on someone else’s software. It’s tiresome hearing how everyone calls themselves a fintech and don’t have a software engineer.
“We have a proprietary technology platform that we built from scratch, and we are always working to build a very, very scalable business in this sector. And quite frankly, nobody else has done that.”
CrowdProperty’s launch in Australia is proof that the platform’s business model and technology can be transferred to another market, Bristow adds. CrowdProperty Australia launched in mid-2021, and has accumulated more than 14,500 investors, with AUS$223m (£116m) invested to date.
Over the next three years, Bristow’s plan is to continue to grow its international presence, and build on its reputation as a development finance provider. He expects to see the property P2P lending market thin out somewhat, although he would like to see better data transparency before this happens. However, ultimately, CrowdProperty plans to keep doing what it does best.
“We as a country need to build more homes, and CrowdProperty was set up with the aim of unlocking smaller property developers, because output was falling from them,” explains Bristow.
“And a big reason was because they really struggled with financing. That’s the pain we are solving by definition of our growth. But we need more houses in this economy. And each home that’s built is worth hundreds of thousands of pounds worth of spend on labour, materials and services in the economy. That’s the criticality of this asset class.”