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Post by Ace on Nov 27, 2019 0:52:12 GMT
I've had a look through the website and couldn't find an answer to this question. I would particularly like to know what happens on multi-phase loans where a later phase doesn't attract sufficient funding. Are they underwritten? It seems to be a pertinent question at the moment as there is currently a 2nd phase lower rate loan in funding that is taking longer than normal to fill. This is a well known problem on multi-phase development loans, so I'm sure a platform as professional as CP will have it covered, but I didn't find the answer. I haven't viewed their blogs, so perhaps it's covered there. Tagging CrowdProperty Representative for comment.
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Post by CrowdProperty Representative on Nov 28, 2019 8:32:53 GMT
Hi Ace,
Many thanks for your message.
This is a great question as it's an important one for property development funding. First and foremost, we have been lending for over 5 years with a 100% capital and interest payback track record, only ever tightening our due diligence criteria and therefore we only grow the opportunities listed by attracting more (uniquely directly originated) applications and driving up the quality mix of those applications. That's what we promised earlier this year, as part of our ongoing work on building our origination, as we recognised the frustrations from lenders trying to get into our quality projects which were funding in seconds. We received £185m of direct applications for funding last month alone (of which we'll likely approve and fund around 5%) - proof that the hard work building our direct to developer brand is paying off, bringing more loans to the platform and a better balanced marketplace. Therefore we expect loans to take longer to fill, which is exactly what lenders wanted.
More importantly, however, our track record, consistency/tightening of our criteria, deep expertise in exactly what we're lending against, first-charge security, lender of first resort positioning and our absolute focus on getting better and better every day in our area of expertise has attracted capital beyond just retail lenders, giving us surety of funding any project and phases of projects from those sources if required (although to date this has never been necessary). This builds a strong, reliable, future-proofed and scalable lending platform.
More specifically, when we are raising funds for a subsequent phase of a development loan we always ensure that we raise funds ahead of when they will be needed for the developer (and time this carefully based on our marketplace metrics and analytics across the many pots of capital, plus the timing requirements and situation of each project). We also raise more than what is needed for just the next drawdown of funds. Lenders receive interest for this but it also gives us flexibility in amount and timing of raises. This ensures that we are able to provide the borrower the necessary funds to continue with the development and not disrupt the progress of works (as developers ourselves we understand how critical this is), whilst allowing the loan to be listed for longer on the platform should it need to be.
The project that is currently funding on the CrowdProperty platform is offered at a risk assessed rate of 7.25%. This project offers strong security to lenders as the borrower is already out the ground on the development and ahead of his programme of works, as well as a loan to GDV (excluding rolled up interest) of 43.2% and a loan to GDV including rolled up interest of 47.7%. Whilst 7.25% is on the lower end of what our platform offers, we suggest greater acknowledgement for these risk metrics - this is a strong project/borrower/security combination and the rate reflective of that. Sentiment from some is that there is lower appetite for the lower LTGDV projects (offering slightly lower rates), maybe because we are delivering very well at higher LTGDV projects given our rigorous due diligence, asset-class expertise and insistence on first-charge security. Bringing more, higher security projects, as part of our overall origination growth helps lenders build a stronger, more diversified portfolio.
Kind regards The CrowdProperty Team
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Post by Ace on Nov 28, 2019 9:53:18 GMT
Thanks for replying CrowdProperty Representative, I appreciate your continued engagement with the platform. This transparency is one of many features that make your platform stand out as one of the best IMHO. I recognise your need to get the advertising speal in, and am happy to give you the opportunity. After all, we lenders will only succeed if you do, so it's in all of our interests that you continue to grow in a profitable way. However can I just clarify that what you were heavily implying, without quite saying is: You have sufficient non-retail funding that you can call on to cover all future phases of all multi-phase projects that have already had their first phase funded. And, therefore, there is zero possibility that a later phase of such a project would not be funded.
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Post by CrowdProperty Representative on Nov 28, 2019 10:36:19 GMT
Hi Ace
The 'advertising spiel' is actually really important context to this question, because it's building a demonstrably strong lending business through more than 5 years that gives us the stability of the platform and the ability to attract plenty more quality lending opportunities.
Just like right now we don't have projects listed on the platform for all the funds that are on the platform, we don't have all the funds on the platform to fund 100% of all phases going forward. That would be both inefficient and costly, increasing the spread we'd need to take to fund the business (at the end of the day, the most efficient matching of the supply and demand of capital, alongside deep asset-class expertise gives the better deal for all in this sector). We have agreements and arrangements in place with deep pockets should phases fall short. This is not contractually committed 100% cover, in a similar way to banks having a capital adequacy requirement that are a % of their loan book (our cover is far more material than those levels and deeper pockets mean that there is stretch cover to potentially 100%), as we also have purposeful flexibility in the scheduling of capital raises based on platform liquidity (which we have excellent line of sight on) in terms of the amounts in each raise, the number of raises and how those are structured, as well as having excellent data/insights on the levers to manage overall liquidity. It's difficult going into more detail on this given that this forum is also open to competitor eyes who have shown a penchant to try to emulate many of the things we do (although without the benefit of the intricate detail we go to in all elements of our business).
As you'll have seen from the raise today, there is plenty of liquidity on the platform, we have a very strong loan book position and have backup capital. This is core business for us running a robust and stable marketplace platform.
Kind regards,
The CrowdProperty Team
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Post by Ace on Nov 28, 2019 14:18:11 GMT
Thanks for the candid clarification. I'm happy that I have a better understanding because of it, and accept that it's not in your (and therefore our) interests to give any more away to competitors.
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littleoldlady
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Post by littleoldlady on Dec 12, 2019 15:53:03 GMT
Just like right now we don't have projects listed on the platform for all the funds that are on the platform, we don't have all the funds on the platform to fund 100% of all phases going forward. That would be both inefficient and costly, increasing the spread we'd need to take to fund the business (at the end of the day, the most efficient matching of the supply and demand of capital, alongside deep asset-class expertise gives the better deal for all in this sector). We have agreements and arrangements in place with deep pockets should phases fall short. This is not contractually committed 100% cover, in a similar way to banks having a capital adequacy requirement that are a % of their loan book (our cover is far more material than those levels and deeper pockets mean that there is stretch cover to potentially 100%), as we also have purposeful flexibility in the scheduling of capital raises based on platform liquidity (which we have excellent line of sight on) in terms of the amounts in each raise, the number of raises and how those are structured, as well as having excellent data/insights on the levers to manage overall liquidity. It's difficult going into more detail on this given that this forum is also open to competitor eyes who have shown a penchant to try to emulate many of the things we do (although without the benefit of the intricate detail we go to in all elements of our business). As you'll have seen from the raise today, there is plenty of liquidity on the platform, we have a very strong loan book position and have backup capital. This is core business for us running a robust and stable marketplace platform. Kind regards, The CrowdProperty Team The Weymouth loan will soon demonstrate the effectiveness of this strategy.
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