ONE OF the things that defines CrowdProperty is its insistence on always holding first charge security on every one of its property projects. And for chief executive Mike Bristow, it is the only way to significantly reduce risk and deliver the best possible value to investors.
“First charge security is exactly the same as the rights that a mortgage company might have with a mortgage over your own residential home,” says Bristow. “Everyone knows that if they have a mortgage, they are obliged to keep up repayments or the property may be repossessed. And I think that proxy is the best way of articulating what first charge security really means.”
The first legal charge holder is listed on the Land Registry as the primary senior debt holder against that asset, and they are entitled to exercise their legal right to repossess the asset to protect the interests of that first charged secured loan.
For CrowdProperty’s investors, this means an extra layer of protection against a default, and Bristow knows from experience that the process works.
“We have only had to take legal action on one of our projects,” he says. “We recovered in full all of the lenders’ funds and all of the interest, and there was even a little left over for the borrower.
“We’ve proven that we can expertly manage a full recovery, and in the rare instance it happens, we leverage the senior security and control to most effectively repatriate lenders’ funds.”
When it was founded in 2014, CrowdProperty was one of the first property-backed peer-to-peer lenders on the market, and this five-year track record means that it is one of the few platforms to have completed a material proportion of full loan cycles. It targets rates of up to eight per cent per annum, and to date none of its investors have experienced any capital or expected interest losses.
Bristow credits part of the platform’s stability and success to its first-charge rule, but he is careful to emphasise that it is treated as a last resort, and the vast majority of CrowdProperty’s loans will never have to get to the point where a contract is being enforced. CrowdProperty works closely with its borrowers to ensure good progress of its quality projects and Bristow’s team of property experts are always on hand to proactively tackle any potential issues, working closely with borrowers, as all parties want to see the successful completion of the project.
“You’ve got to look at every single factor but the overriding question that we ask is: Are we acting in the best interests of our lenders and the recovery of their funds plus owed interest?” says Bristow. “The answer is yes and we will always uphold this absolute priority.”
This enviable track record and wealth of expertise has helped the platform win more than 7,500 investors, with 100 per cent of projects completely paid back – a true endorsement of its insistence on the first charge rule.
Next month: The second part of our series on first charge security, as Bristow explains CrowdProperty’s approach to the ‘capital stack’.