Current market conditions have impacted the property lending industry, with a number of developers exceeding their contract end dates as a result. Protecting investors’ funds, which come from financial institutions, funds and private investors, is our number one priority. We do this by securing every loan with First Charge security, rigorous due diligence and deep expertise in property and property development.
It is important to remember that property development projects are complex by nature, and this is a high-risk investment, with a typical and anticipated industry asset class loss of 1% as stated on our statistics page.
To date, after almost 10 years of lending and £387 million lent, and £230 million paid back to investors, our actual losses represent 0.01% of our loan book.
CrowdProperty loans are secured by a first legal charge against the property asset, at Loan to Values that ensure a good buffer between the loan amount and the value of the security. The developer then has skin in the game as they need to put capital into the project which, alongside the profit from the project, is only realised by them once the loan and interest has been repaid in full (CrowdProperty also only take the spread of interest at the same time as investors get theirs).
The first charge we hold on all projects is enforced as a last resort, as it’s typically best that the site be progressed and completed by the developer we have lent to. In the case of receivership, receiver fees come first from any capital receipt, and securing the site incurs monthly expenses, so we aim to exhaust all options ahead of this with our experienced Portfolio and Credit teams. Although enforced as a last resort, First Charge security is a crucially important element of our proposition and has been successfully enforced on many occasions to date.
The handling of overdue loans requires diligence, experience and skill to support an efficient completion and exit, and there is always significant work going on behind the scenes focusing on the successful resolution of loans. We communicate material developments to investors at the appropriate time, carefully considering all sensitivities.
Although it can be frustrating, allowing more time to exit the loan is often the best option, as stepping in and forcing a quick-fire sale can negatively impact the potential sales value and therefore impact the returns for our investors. It is important to note that we will only allow this time if the developer is continuing to make good progress with the build and/or towards securing their exit strategy, and that exit strategy is agreed to be viable by our portfolio and credit teams.
Of the £231 million paid back to investors to date, 58% was repaid in full before the contract end date, and 42% repaid after the contract end date. This has an impact on how your portfolio looks on your account page, because later loans remain in your active portfolio, so a portfolio should be considered as a whole - paid back and active together.
We do, of course always aim for projects to be repaid on time and appreciate the frustration when this is exceeded, which is why investors receive a higher interest rate during any late period. Details of your repayments to date can be seen in the Overview - History section of your dashboard.
We’re focused on being the best property development lender to small and medium sized residential property developers. Having funded the development of over 3,550 homes worth over £832m to date. Our focus on supporting property developers exceptionally means we attract the best quality property development loans, which brings the best investment opportunities to all our investors.
As a result, the volume of lending opportunities over time on the CrowdProperty platform means that investors can build a diversified portfolio of first-charge secured development loans – offering up to 10.5% returns.
With 460 projects backed to date, over 860,000 investments have been made, with the average CrowdProperty platform investor diversified across over 81 first-charge secured projects. This risk-mitigating approach to your investment portfolio can also balance the flow of returns to your account, enabling improved availability of funds to achieve your investment objectives.
Please note, we aim to send quarterly updates on all projects and these updates can now be easily seen via your loan portfolio.
If you are interested in reading a third party view on the state of the market, it is also 4th Way's Neil Faulkner's view that 'across all the P2P development lending companies that provide 4thWay with detailed data, “CrowdProperty's story is pretty representative.”
A link to the full article can be found here.
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