Real Estate Crowdfunding

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Real Estate Crowdfunding, ,Alternative Finance Sector Report - October 2014 9
REAL ESTATE CROWDFUNDING
ALTERNATIVE FINANCE SECTOR REPORT
PUBLISHED
October 14
AUTHOR
Samantha Goins
Real Estate Crowdfunding
Platforms
The Role of the Platform
The main role of a crowdfunding platform
is to provide deal flow. Online platforms
allow investors easy access to investment
opportunities which can be added, updated
and subscribed to any time of the day.
Some platforms have chosen to ensure a higher
quality of deal flow by undertaking their own
due diligence on investment opportunities.
Many set requirements that developers must
meet such as proven track records, credit and
background checks. Once a project has been
fully funded the majority of the platforms will
require frequent, usually quarterly, progress
updates.
Some platforms have a provision fund (or
similar) to protect investors’ should the
borrower default. Others choose to take
a charge over the property as security for
investors. Many also have a system in place to
manage investments should the platform fail,
such as appointing a new manager or trustee
to oversee administration.
For developers, platforms provide an effective
way to market their projects to potential
investors. Many follow a uniform template
for how to list information so it is easily
understood by investors. Investment providers
can assess the benefits and costs of each
platform and decide where is best to list their
investment.
Platforms provide a straightforward investment
process. Everything can be done online, from
reviewing and signing legal documents to
transferring funds, saving time and costs for
both providers and investors.
Rental growth Capitalgrowth Equivalent yield Income return Total return
Outlook for key commercial sectors
Source: Savills Research
Retail prime Retail secondary Office prime
Office secondary Industrial prime Industrial secondary
0%
2%
4%
6%
8%
10%
12%
UK capital values Londonrents London capital values UK rents
2014 2015 2016 2017 2018
Annual Growth 2014 - 2016 %
Source: Savills Research
Residential property prices forecasts
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Platform Successes
iFunding, a US based platform, was one of the top fund raisers with over US$25.6m raised since its launch in Angels Den hosts monthly
Speedfunding events, which have a success rate of 90% of fund seekers able to find at least on investor willing to invest in their
business. 2013 from a pool of 3,000 investors18.
Platform Failures
There has only been one platform failure identified to date, Collaperty. Launched in 2013 as a commercial real estate crowdfunding site
they are no longer in operation. Their website states “not being able to provide what the market is looking for” as the reason for their
closure.
UK Property Forecasts 2014-2018