Real Estate Crowdfunding

, ,Alternative Finance Sector Report - October 2014

Samantha Goins

PUBLISHED

October 14

AUTHOR

REAL ESTATE CROWDFUNDING

ALTERNATIVE FINANCE SECTOR REPORT

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UK Crowdfunding Regulation

On 1 April 2014, the Financial Conduct Authority’s (FCA) policy statement, PS14/4, on the regulatory approach to crowdfunding came into

effect. The policy covered two broad categories of crowdfunding – investment-based and loan-based crowdfunding.

Loan-based (debt) Crowdfunding

Platforms must meet a minimum prudential requirement to ensure ongoing viability

Platforms must have a process in place to ensure existing loans continue to be managed if the platform fails

Platforms holding client money will be brought into the existing CASS regime of client money rules

Implementing cancellation rights for consumers

Enforcing improved disclosure of information by platforms to consumers

Enforcing the current FCA dispute resolution and giving consumers access to the Financial Ombudsman Service (FOS)

Platforms will have to report their financial position, client money holdings, complaints and loans arranged to the FCA

Investment-based (equity) Crowdfunding

The FCA restricts investment to four categories of investors.

Certified sophisticated investors (including self-certified)

Certified High Net Worth investors

Retail investors that confirm that they will receive regulated investment advice or investment management services from an authorised

person, regarding the promoted investment

Retail investors who certify that they will not invest more that 10% of their net investible portfolio in unlisted shares or unlisted debt

securities (excluding their primary residence, pensions and life cover)

The full policy statement can be found on the FCA website

Real Estate Market Update

The real estate market has a number of different investment opportunities providing a choice of locations, build types and sectors.

It has historically been a strong performing asset class. This section provides an update on the global real estate market and the

emergence of crowdfunding as an alternative form of finance.

Real Estate Returns

Historical returns from real estate in key locations across the globe have been strong. In 2013 IPD tracked a 10 year annualised total

return of 8.4% in the US

and 6.3% in the UK

Prime UK commercial property values are forecast to increase by over 8% per year from 2014 to 2018, and residential property is

expected to grow by 5.5% per year around the UK and 6% in London by 2018