Build Magazine August 2015

Build Magazine 23 needed to secure bank debt on a joint-ven- ture basis. This is ideal for small change of use projects or new build developments that can be completed in a reasonable time frame offering investors a share of the profits on completion and sale. The second opportunity exists for the increasing number of developers who see the benefits of Develop-to-let. With the demand for rental properties increasing whilst the number of people able to buy decreases, it is becoming increasingly popular in city centres. In these situations developers can use platforms like ours to release capital or repay debt by replacing it with equity from the crowd. The developers arrange the letting and management of the units and share the income and a proportion of the capital growth at the end of term – usually 5 years post completion. In exchange, the developers increase the overall return they generate from each unit they hold on to, meaning their profit per development as well as their cash flow increases. Finally, crowdfunding can be seen as a new sales channel and this is particularly relevant to developments aimed primarily at the investment market. An area that is becoming increasingly competitive as the number of developments grows whilst the number of investors able to afford a single unit remains limited. Some prefer to pre-sell units off-plan to help secure debt and here they can use crowd- funding to open up their propositions to a much wider audience. Potential landlords who are unable to put up the entire deposit themselves can be offered the oppor- tunity to crowdfund the rest. Some de- velopers decide to act as the Landlord by leaving a small amount of equity in each unit. It can be a very powerful sales tool that reduces the marketing costs and speeds up off-plan sales which can make a difference to their ability to secure debt as well as their overall margin. Example Prosperity Fund are a proven and respected property development business operating mainly in the Midlands. They specialise in high quality apartments sold mainly to investors, many of which are based overseas. One of their apartments is currently listed on CrowdLords as an ‘Offplan’ investment offering investors two classes of shares with different returns. Those that commit funds ‘Offplan’ now are entitled to a larger share of the capital growth than those that invest on completion. There’s no doubt that this is just the beginning of how alternative finance is bringing innovation and creativity to development funding. Platforms like ours, and others that operate in the commercial sector, are always looking for new ways to enable more people to invest in property whilst at the same time supporting the supply of properties this country desperate- ly needs. We can see the potential by study- ing what has happened in the US. Volumes and value started low until the institutional funds saw the oppor- tunities of investing alongside private individuals. Reducing their exposure to individual deals whilst at the same time giving the crowd more confidence to invest. It seems that things will take a little longer in the UK but the signs are that things are moving in that direction. Inside the Industry