New P2P platform closes its doors to lenders (Fruitful)

Yes, I have a similar remaining unexciting sum, the new doings require a minumum of £1,000 if you want to get on the 33% wagon.

Just had this email from Fruitful Homes, estimating a return pa of 33% after fees, sorry can't seem to post the images that state the estimated 33% return.

I'll register shortly to see exactly what the offering is.




Your Fruitful Homes Exclusive Invite


Hi xxx,


We're thrilled to announce that the Fruitful Homes investment platform is now live, enabling you to make the great returns from our property development projects, online, at the click of a button.

Since you requested an invite, we’re giving you exclusive access ahead of our public launch.

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Fruitful Modular Homes
Fruitful homes are developed using a modular system in a controlled factory environment. Our efficient construction process enables us to complete homes in under 4 weeks and without the risk of prices escalating. This means we're able to accurately estimate your return on investment while making more homes to help solve the UK housing crisis.


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"
The thing that I champion is sustainability. My terror is that suddenly we see it as a luxury, not an essential. That’s a danger.
— Kevin McCloud, Grand Designs

We're changing the world, one home at a time
We all know we need to make changes to our lives in order to save our beautiful planet. However, for most people, this is much easier said than done.

Here at Fruitful Homes, we figured instead of continuing with our set ways, lets make it easier for people to change the way they live and what better way to start than by the homes we live in. Using the latest technologies, we're making beautiful, sustainable homes affordable for everyday people.

Thanks again for requesting to join us on our mission to build the future of housing. We're looking forward seeing you on our platform.

If you have any questions, please feel free to email us any time at hello@fruitful.co or call us on +44 203 813 0435 and we’ll be happy to help you.

Have a great day,
The team at Fruitful Homes

I've registered to have a look.

They've currently got one investment available, a 22 property development on the coast of Devon.

TLDR; best I can make it they're offering second charge @ a proposed 85% LTGDV. This is based on a GDV of £6,919,200, minus £4,903,008 in project expenditure, minus ~£1,000,000 in project finance cost, sales fees and Fruitful's management/arrangement fee.

That leaves £1,007,729 profit payable against investor seed capital of £2,000,000 = 50.38% return over the project term. The project is estimated to take about 18 months from finance to final sale, so that's 33% ROI per annum.

Seems pretty high risk to me, hence the high reward. That 85% LTGDV could quickly rise to 100%+ from either unexpected cost overruns or failure to achieve target sale valuations. The proposal states the sale valuations are on the cautious side, local estate agents think they could sell for more (a few comparable properties are referenced with recent sale values). There is no formal valuation document available to provide more detail.

This is not P2P lending as we know it; the rate of return is dependant on the performance of the development - problematic occurrences could eat up much or all of that proposed £1,000,000 profit, diminishing your return as it does (possibly resulting in a negative ROI). Or it could all go swimmingly in which case, woohoo, quids in!

I say second charge as before retail investors get any return the High St bank must be paid, as must all compulsory fees/costs. We are the highest risk equity holders, if the development delivers realised sale valuations of £5,919,200 instead of £6,919,200 then we would get zero return on our investment, but everyone else involved gets the same return as if they had sold at the higher valuation. The same is true if project costs run to £5.9M instead of £4.9M. Personally, I'm not a big fan of that risk distribution. Albeit such an outcome would seriously damage future fundraising.

Note: I think second charge 85% LTGDV is almost certainly the wrong terminology to use when describing this proposal, my main point is that there's only a 15% safety net before capital loss is guaranteed. More experienced heads can likely translate this to property development speak. Obviously there's the chance of BETTER than 50% ROI if costs are less than estimated or sale values higher; call me a cynic but that's not usually the way things go.

Equity is the best way of looking at it; the 33% 'interest' pa is derived from the projected 'profit' attributable to investors, therefore the 33% rate can move UP as well as DOWN (i.e. the upside isn't capped should higher than expected sales be acheived).

Hope I'm not breaking any rules by posting a picture of the summarised project finances? Direct link: i.imgur.com/gB85S7e.png

Hi There, 

We think it may help to have some clarification on Fruitful's products direct from the team. 

Our estimated returns are, as mentioned, rather attractive. The reason we're able to achieve such an attractive return is we develop homes ourselves using a modular system.   

This means each of our homes are constructed in a factory, at a known cost, without the risk of prices escalating. This somewhat mitigates the risks to investors. 

Ground works are also tendered and agreed during our planning process, so our developments are at a fixed cost. We also include a 5% buffer into our development costs to cover any unforeseen circumstances, which is returned to investors if unused.  

There is an element of risk like any investment. Our main risk lies with not achieving the projected sales figures. This is why we conduct a thorough market review using national statistics and local agent appraisals. We also under-estimate sales figures so we don't over-estimate investor returns (it's always better to over-deliver).   

We do leverage capital alongside investor's equity in developments. This enhances investors returns while also enabling us to undertake larger projects and develop more homes for the underserved property market. The current project mentioned is leveraged at 60% of the development costs.

Fruitful Homes, unlike most other platforms, only make money when you do by receiving a 25% share of the net profits, while passing the majority 75% back to investors. This ensures our incentives are aligned in maximising the returns from each development and ensuring we price them accurately.  

Further information on fruitful and how it all works can be found on the FAQ section on our website: http://help.fruitful.co 

Please ensure you understand all risks prior to making any investment decision. 



 

Final repayment of outstanding loans due in the next two weeks.