British Pearl

Many thanks for your question. I will attempt to provide you with our thoughts breaking it into the two points that you raise.

Firstly, relating to our business model, British Pearl operates with a few key differentiators to other investment platforms which increase its robustness:

• British Pearl is an investment management business and not a P2P or crowdfunding intermediary. Our “borrower” is a Special Purpose Vehicle (SPV) that holds an individual property investment that we source, secure and manage on behalf of our investors. As a Loan Investor, you are only exposed to the credit/counterparty risk of that vehicle, which is managed by British Pearl. There is no third party such as a developer on the receiving side of the loan and the loan-providing customer benefits from a first charge over the property. Counterparty defaults are a concern for introducer platforms and not an investment manager. The only default British Pearl should be concerned about are tenants not paying rent. We do not expect rental demand to change as a result of any Brexit scenario.  
  
• With a first charge, our loan interest and principal repayment are paid ahead of share investors dividends - and ultimately first in line when an investment property is sold or refinanced through the platform. Our modeling incorporates detail around possible void periods including a reserve at each SPV level and other contingencies.  
  
• As previously noted, we have a fee structure that includes upfront, ongoing and exit fees - these fees are typical of an investment management business, and importantly all returns are presented net of fees. 
• Our product offering is diverse with varying levels of risk across both equity and debt available in/against individual properties so that investors can construct portfolios of their choosing.  
  
• We access a cash funded underwriting vehicle to pre-purchase all properties before they are offered to our investors. This allows us to negotiate strong capital discounts at purchase which helps protect investor capital. 

Secondly, on the broader question of house prices, the comments to hit the headlines in September last year from Bank of England Governor, Mark Carney, indicated that a ‘hard Brexit’ could lead to property prices falling by up to 35% over 3 years. We take a more pragmatic approach based upon two points. Firstly, our commitment to identifying property based investments that are likely to perform over the longer term (we believe that any property investment should start with a longer term view) and secondly, reflecting on previous periods of stress in order to understand the worst case scenarios.

To that end, the last period of extreme property market stress was ten years ago over the period of the global financial crisis. Over this period the market showed a huge amount of divergence across regions and the headline housing market dropped a little below 19%.

With the strong, long term, underlying supply and demand dynamics together with a buoyant rental market we feel that it is unlikely that prices would fall any further than that. What is likely to be different would be that any negative move would likely take place over a much shorter time span rather than the 18 months that it took previously. This rapid move would be driven by a collapse in market liquidity causing transaction volumes to plummet. The only property transactions that would go through would be where a seller is forced to sell and therefore has to pay a large liquidity premium to be able to transact in a timely fashion. This would mean the headline property prices would be lower, but the reality is that immediately that uncertainty begins to dissipate and liquidity begins to return then a more orderly marketplace would lead to the start of a property price recovery. As we are a relatively early stage business with modest assets under management and investment maturities in 2-5 years time, we will not be a forced seller during any pull-back in prices. We see any potential pull-back in property prices over the Brexit and adjustment period as a buying opportunity helping our long term portfolio performance

We would encourage anybody with any questions or who would like any further clarity to contact us directly and we would be more than happy to provide further detail.

Our number is 0203 657 7799 or you can email info@britishpearl.com

Thank you for your question.

During the second half of last year we found that our investor base was generally (although not exclusively) concerned around the possible risks and impact that there could be on property markets generally. With the weak property backdrop and the headwinds of a general election and then the "start" of the Brexit process, we purposefully chose to stop our active marketing campaign.

Now that some of those clouds have lifted we have begun to actively look for some interesting deals for our existing investors and are in the process of developing our next marketing campaign. On top of that, with the ISA season around the corner, we want to ensure we have stock available.

Specifically with regards to our Resale Market, while we are careful to ensure that we market our property-backed investments as being suitable for longer-term investors, we appreciate that having a facility to exit early is a benefit and to that end, we are currently looking at ways to improve liquidity through the Resale Market. Once we re-engage our marketing strategies we anticipate a pick-up in the speed of properties being opened in the Resale Market.

Remember that all of the investment properties that are offered on the British Pearl platform have been pre-purchased with cash through a bridging vehicle which means that you can be assured that all of the investment properties on our site have been vetted, customers earn returns from day one and there is no chance that the deal will fall through, as can happen on many other platforms.

We welcome any suggestions that any investors may have directly to us at info@britishpearl.com and we always discuss them - listening to our investors is the only way for us to continue to improve our investment offering and build long term relationships.

Thanks again and we hope that we have covered the key points you have raised.
The British Pearl Team.

Hi nooneere

As The Guardian article points out, the buy-to-let market has changed considerably over the past few years - particularly in respect of individual landlords. The biggest impacts being from the removal of mortgage interest tax relief and the 3% stamp duty surcharge. The summary of how this impacts on our business model is:

Mortgage interest tax relief - Currently, this benefit continues to apply to corporate buyers within an SPV structure such as the one we operate.

Stamp duty surcharge - The 3% stamp duty surcharge applies to our operating model and as a result we focus on building in as much capital protection for our investors as we can. We work hard to buy well - this means identifying regional opportunities and then carefully selecting individual investment opportunities for purchase and building in as much capital protection as possible. This means that our investment properties should be well placed to outperform the overall property market over time. Further to that, we purchase with cash in order to negotiate strong discounts to open market values (as reflected in property purchase price versus the individual RICS valuations provided for each property). We also carry out any specific works to maximise the property value. This may be minimal for a new build property, extensive refurbishment for an older property or anywhere in between. Finally, we structure each specific investment in a way that we believe is most appropriate to allow customers to build custom portfolios.

In summary, there is an increased supply of property to the marketplace as some existing landlords have begun to reduce their portfolios. If we combine that with the strong long term, underlying supply and demand dynamics of the property market together with a buoyant rental market and an increased supply of property we feel that it is a time of opportunity.

As always, please do not hesitate to contact us directly if you have any further questions as info@britishpearl.com and we will be more than happy to help.

Kind regards,
The British Pearl Team.

As I mentioned above too, they really don't seem to have gained any significant traction since I invested during one of their bonus rounds last year. Properties remain on the primary market making any secondary market exit an impossibility.

The latest move is difficult to read as anything other than a wind down, marketing the entire portfolio. My concern is with the property market all but shut down and a recession looming what value are we going to see.

Can britishpearl offer any explanation of the driver behind listing all properties and reassure this isn't going to be a firesale well below purchase prices!

Yes, despite the announcement that says otherwise, it certainly smells like a wind down to me. 

I can see the point of revaluing the properties to be more accurate in the current circumstances, though I think this would be little better than a guess at this stage. It would allow the platform to continue to trade at prices that might attract investment and allow those desperate to sell to escape. I could also understand blocking all trading until more accurate valuations can be obtained.

I can't see the logic in trying to sell all properties now as it would just guarantee that potential paper losses are made concrete. I would much rather sit tight in the hope that prices would recover in a couple of years time.

Tagging Brickowner for comment. 

Fyi, you may want to check your portfolio value.  My shares have been marked down by nearly 1/4.  Discounts to these ‘fair’ values when resale market reopens will be significantly below cost.