ShareProperty is a soon-to-launch crowdfunding platform for investment in UK regional residential property. ShareProperty aims to provide a range of carefully curated investment opportunities, and allow investors to participate in a market which would otherwise be unreachable.
ShareProperty has assembled a dynamic multi-disciplinary team with expertise in property, technology and finance. The Co-Founders and strategic investors have funded the business to date, enabling the Company to build out the technology platform and achieve appointed representative status as an appointed representative of Kession Capital Limited (FRN 740242). The Company is now looking to scale operations, fund its pipeline, and optimise the technology with new data analytics features.
The platform is designed to create an interactive forum for the online exchange of ideas. Members can interact with each other and the ShareProperty team providing regular project and market updates.
We at ShareProperty believe the market for residential property investment is in the midst of a structural change. Fractional ownership through crowdfunding portals provides access to an asset class which would otherwise be out of reach for the majority.
With a minimum investment of £100, ShareProperty will allow any investor to begin the process of building out a property investment portfolio. Each investor will be provided with a range of investment opportunities which matches their individual risk profile and receive both income and capital growth through a single purpose vehicle (SPV).
We have a focussed investment strategy based on our thesis of the relative attractiveness of regional investment property. Our valuation analysis suggests that the Price/Earnings Ratio (defined as average house price/average earnings) of London currently stands at 12.19 versus 5.17 for the rest of the UK. This valuation gap is towards the upper end of the historic range.
For the first twelve months, our strategy is to focus on opportunities in the South West and Wales. Savills forecast 5 year growth in these areas of 19.9% and 14.8% respectively. Combined with attractive yields, we believe the investments in our target markets will provide ShareProperty members with compelling asset backed returns.
The platform can be scaled to incorporate investments from outside of our immediate target market (Non-Prime London and South East) though it is our intention to focus, in the first instance, on the markets we know well.
Liquidity will be provided through a secondary trading exchange enabling investors to post their investments for resale after the minimum three month holding period. As the number of registered users increases, so we envisage an increase in secondary market liquidity.
Data analytics, social media and user toolkits will enable investors to exchange ideas, and obtain regular project and market updates in line with our core transparency theme.
Substantial accomplishments to date
To date, the Company has achieved a number of key milestones:
- Platform: Version 1 of the Platform is scheduled to be launched in the summer of 2016. Our development strategy combines leading market technology (JOI Media) with in house development.
- Shareproperty Limited (FRN: 740242) is an Appointed Representative of Kession Capital LImited (FRN: 582160) which is authorised and regulated by the Financial Conduct Authority in the UK.
- Pipeline: to date, the Company has 58 registered property developers who, in aggregate, have stated they have potential pipelines in excess of £70m of property value. This is complemented by a team with deep local knowledge.
- Partners: ShareProperty has established links across the supply chain providing a regular flow of projects for in house appraisal. We have also established, what we feel are strong, working links with local Universities as part of ongoing product development initiatives, most notably in data analytics
The ShareProperty Platform is predicated on maintaining a balance between the amount of available investment capital and a steady supply of projects which have satisfied the due diligence process.
Our model is based on sourcing projects from accredited SME Developers and Landlords. The Platform evaluates both the individual and the projects for suitability. Where, for example, an individual fails to satisfy our credit scoring system they are either rejected or there will be requests for further information including, but not restricted to, the ability to offer surety by way of personal guarantee. Each project is assessed according to the ShareProperty viability calculator which appraises the financial robustness of any submission.
Through sourcing projects from third parties, ShareProperty believes that the total number of "viable" projects can be maximised. We do, however, expect a significant (>80%) rejection rate based on our credit and viability scoring process.
We believe that ShareProperty offers a scalable solution to property investment, meaning that growth is only constrained by lack of investment capital or insufficient pipeline. It is intended that ShareProperty "users" will be attracted to the platform through a combination of digital and traditional marketing. We have established relationships with a number of local and national media channels which we hope will drive traffic through to the platform.
We expect our user base to be a blend of high net worth (HNW) and retail customers, though as the platform gains traction, we would anticipate an increasing flow of institutional funding, as we are currently seeing in the more advanced Peer to Peer (P2P) markets. We have an extensive database of pre-existing contacts who are planned to be migrated to ShareProperty.
ShareProperty plans to generate revenue from the take rate, or margin, on funds raised. This will typically be in the range of 3-5% depending on the size of the project.
Use of proceeds
Funding will enable the company to scale operations and can be broadly broken down as follows:
-Marketing (40%): our marketing team has developed an integrated marketing strategy combining SEO, Content, Social Media and traditional channels. Abigail Moses, Business Development Executive, has strong links with press agencies locally and nationally.
-Platform optimisation (20%): V1 of the Platform is planned to be live during the Summer. Further development initiatives include the integration of a data analytics suite enabling UK investment opportunities to be assessed at postcode level.
-Legal documents (20%): our legal partner, Capital Law, is creating a suite of documents to accommodate the issue of securities in each single purpose vehicle.
-Working capital (20%): a small amount of the funds raised will be used for working capital purposes including salaries and compliance costs.
-Team: we are looking to bring in a CTO in 2H 2016 to lead new feature development.
The ShareProperty platform is designed to maximise the flow of investment opportunities to accredited investors. Our model is innovative when compared to current competitors in that the platform is set up to allow third party developers/landlords to submit projects for appraisal and funding. We are not therefore reliant on self-sourcing. Each individual and project is screened through a due diligence process which "rates" the potential investment. Typically we expect a high rejection rate since only those projects which satisfy our core criteria can be posted to the platform.
To date, ShareProperty has 58 "accredited" SME developers registered with the platform who have stated they have a potential future pipeline in excess of £70m of property value. Our investment strategy for the first 12 months can be defined as follows:
-Low risk residential investments, typically B2L or rehabilitation projects with a ticket range of 50-500k.
-Geography : Focus on the South West and Wales, areas that the team have deep knowledge of, and in the opinion of the Directors, offer attractive yield/capital growth opportunity.
Investment capital for the platform is likely to be provided through a number of sub-groups:
1.High net worth (HNW) investors (30%): A wide network of HNW contacts are planned to be migrated to the platform.
2.Landlords (40%): ShareProperty has extensive contacts in the Landlord Community. We believe that Landlords are looking to platforms like Shareproperty for portfolio investment in light of Stamp Duty hikes and reductions in mortgage interest relief on second homes.
3.Retail investors (20%): with a lower limit threshold investment of £100, ShareProperty aims to encourage interaction and investment from a wide retail base.
4.Institutional investment (10%): as with the P2P markets, where it is estimated institutional money now represents >45% of gross platform volumes, so the Directors expect to this trend to be mirrored in the equity platform market.
Characteristics of target market
The stock value of UK Residential Property at the end of 2015 was estimated at £5.75trillion with an increase of £966bn over the last five years (Source: Savills). The Private Sector Rental (PSR) Market was valued at £969bn at the same period, and has seen a steady proportionate increase driven by a combination of significant B2L investment and lack of affordability (Source: Savills). In 2015, a Nesta report stated that the total value of real estate crowdfunding was £87million.
Despite government initiatives such as Help to Buy, property remains out of reach for the majority. As a consequence, the PSR market is expected to continue to grow. Despite a softening in some areas of the market (Prime London), forecast growth for the housing market will continue to extend the affordability gap.
ShareProperty will enable investors to participate, through fractional ownership, in a market which, in the opinion of the Directors, will continue to show positive medium term growth. We believe the P2P and Crowdfunding markets represent a beginning in a structural market shift.
The Company has an integrated marketing strategy which will enable it to build out brand awareness. This combines:
1. Content Creation and Data Analytics: our goal is to provide an interactive platform which encourages community. This will most likely be achieved through insightful content and the ability of users to assess opportunity through embedded data analytics. ///Our target for users in Year 1 is 5,000.
2.Quality pipeline: a focussed investment strategy should provide assurance that ShareProperty is only providing pipeline in areas that it knows well. This will mean that for the first 12 months, projects will be in the South West and Wales.
3.Existing relationships: the team has relevant personal contacts which we plan to leverage on the platform
4.Traditional Media Channels: Abigail Moses, Business Development Executive, has strong contacts with a substantial number of local and national media channels having experience working in B2C e-commerce marketing.
Market awareness for real estate equity crowdfunding continues to increase. Nesta reports that equity crowdfunding volume in 2015 was £87m, a YOY increase in excess of 150%. The market lags behind the more mature P2P real estate market which saw volumes in the equivalent period of c.£600m (Source: Nesta, University of Cambridge). Equity "risk" normally demands a higher return on investment (ROI), though to the extent that the Single Purpose Vehicle retains title over the asset, this risk is to some extent mitigated.
The management team believe that one of the critical success factors is liquidity. The platform will offer a secondary trading exchange enabling investors to offer their shares for resale after a minimum holding period of three months. Liquidity is expected to increase with the number of platform users.
Combined platform volumes in 2015 for P2P and equity real estate crowdfunding were £687m (Source: Nesta, University of Cambridge). This represents <0.1% of the value of residential housing stock in the UK. A 1% transference from traditional channels to the P2P/Equity markets for real estate investment would suggest an increase in the total available market (TAM) of around £9bn. Accordingly, the Directors see the growth dynamic of the sector as allowing for multiple market participants, much the same as the e-commerce technology cycle which began in earnest at the turn of the millennium.
The unique selling points of ShareProperty can be characterised as follows:
1 Focussed investment approach. Product and geographical focus which will enable Shareproperty members to participate in selective opportunities;
2.Transparency: all platform fees are clearly stated aiming to ensure the Return on Investment estimates are what investors can expect to receive;
3. Analytical tools: successive platform developments should enable investors to perform their own market analysis, and make informed investment decisions;
4.Team: ShareProperty has assembled a multi-disciplinary team with skills in property, structured finance and technology;
5.Research and Development: relationships with a number of Universities should enable Shareproperty to develop a strong product/R&D pipeline;
6.Technology: ShareProperty works with a number of best of breed technology partners, ensuring that the platform integrates all relevant features. Open application programme interfaces (API) enables third party applications to be seamlessly integrated;
7.Due diligence: the Platform integrates credit scoring and financial viability tools to enable rapid decision making.