British Pearl offers property backed share and loan investments. In a press release circulated today, it was announced that Lord Stanley Fink, former Conservative Party Treasurer and philanthropist, leads £7 million investment in the business. In this exclusive interview, we talk to British Pearl CEO, Ali Celiker, about his motivations to create British Pearl, how the platform works, what the plans are for the future, and much more.
Can you provide an overview of British Pearl?
British Pearl is the first property investment platform to offer both share and loan investments in individual properties. Investors can buy shares in properties they select and can also be mortgage lenders in their own right.
When making loans, investors receive a fixed interest rate of up to 4.4% p.a. paid monthly. Their capital is secured with a first charge against the property just like a high street mortgage. With Loan-To-Value ratios of between 50% and 70%, investors can expect a safe source of income.
Our share investments generate a monthly net rental income for investors, who also benefit from any capital appreciation of the property. At the end of the investment period, the property will be sold (unless investors wish to renew) and, once the loans have been repaid to Loan Investors, any remaining capital is distributed to Share Investors.
Those wishing to exit prior to the end of the investment term have an opportunity to do so through the Resale Market. British Pearl has opened the door to effective, reduced-risk and diversified property investment.
Where did the inspiration for the platform come from?
After a long career in banking I was inspired to launch British Pearl to provide an alternative to traditional financial services in a post credit crisis world where consumers demand greater transparency and control over their financial future while using the latest technology.
We chose to provide people with access to property backed investments because it is a tangible asset where most people understand how the returns are generated. Additionally, in recent times property has delivered superior risk adjusted returns when compared to other savings and investment products.
I am proud to be part of the new age of finance disrupting the traditional investment world while simultaneously creating access to property investment as well as providing much needed capital to our real estate sector. I see this as the future of property investing.
What are the challenges that you faced prior to launch and expect to face when scaling the platform?
There are so many challenges when setting up a business let alone an innovative business model that requires FCA regulation. I would group the challenges into three areas: people, funding and operations. People: convincing people to join your team and believe in you and the business model while it is still just an idea. Funding: persuading individuals to part with large sums of money for working capital, armed only with a powerpoint presentation. Operations: obtaining FCA authorisation, implementing compliant complex operations and developing cloud-based software in order to deliver a simple and fully automated user experience. I am pleased to say we managed to meet all three challenges and now our investors can register and become shareholders or lenders.
To get to this point, it was absolutely essential to build sound foundations from the very start in terms of people and operations. Now our infrastructure is in place the ongoing challenges we will face as we scale include acquiring good investments, making our service known to the wider public and continuing to innovate our technology to meet investor needs.
Have you witnessed equity investors also lending on the platform? Are these two-separate customer segments or are you witnessing and expecting a significant crossover?
Our service is very new. During our beta testing phase approximately 100 people invested in our first property in Acton, which reinforced our hypothesis that investors would want a mix of shares only, loans only and both.
We believe that our investments are attractive to a broad base of people for a variety of reasons. On the one hand, some may be attracted to being exposed to carefully selected property investments, in terms of possible capital gains and the rental income they offer. On the other hand, people may have cash holdings, for example in a cash ISA, generating very little income. They may be attracted to the higher interest rates our loans pay, coupled with the conservative LTVs providing them with greater peace of mind over their capital. We will be closely monitoring and responding to customer behaviour.
Our goal is to give investors the choice of share and loan investments. They can build and run portfolios that are much more agile, diversified and tailored to their own risk profiles. Further diversification is possible thanks to British Pearl offering a wide range of properties with different risk/return levels.
It states on the website that a standalone property company managed by British Pearl will own each property. Will British Pearl therefore manage the development, rental and sale of the property? How does the management of the properties work?
British Pearl is an asset manager not an intermediary, unlike the vast majority of P2P platforms. We act as the Investment Manager for each property in our capacity as an Alternative Investment Fund Manager. This means that we manage the entire investment process from sourcing and acquisition through to exit.
We oversee any required refurbishment or development and our in-house team uses our nationwide relationships to ensure efficient and cost-effective property management.
Investments may be offered for a renewal of the term but if there is insufficient take up then the property will be sold on the open market.
How are the properties acquired? Is the standalone company purchasing from the open market or directly from developers then refinancing with crowd investors?
Our expert team sources and secures properties after thorough due diligence and only if it meets our strict investment criteria. We secure properties in two ways, either using an underwriting vehicle or with an exclusive purchase option.
Where we use an underwriting vehicle, the investment is purchased and then refinanced on the platform. This is desirable as it removes completion risk and as a cash buyer we can lock in good discounts. All savings made are passed on to our investors – we do not add a margin to the purchase price. We want to be known for good investments with strong returns.
What type of property investment is the platform’s sweet spot?
Our mission is to create a liquid platform for property investment and development capital. To achieve this we aim to offer the most diverse range of property investments on the market, so our investors can choose the type of investment as well as how to invest, i.e. shares, loans or both.
Our investments broadly fit into two types; buy-to-let (BTL) and development. BTL investment returns include monthly net rental income and a share of any capital gains. Development returns will only be a share in any capital gains. We sub-categorise properties as tenant ready, refurbishment or high yield.
At the start, investment values will range from £300k to £600k for BTL, while developments will be of higher value. Naturally, deal sizes will increase over time in line with our growing investor community which increases our buying power. Investments will be from across the country and commercial investments will be available later in the year. We are currently targeting lower risk investments with conservative LTVs which is why we will not be offering bridge finance.
All investments are subject to a strict proprietary investment criterion. Our current investments offer estimated returns of up to 13.4% p.a. for shares and 4.4% p.a. for loans. We always look for properties with a compelling investment case, whether it is a property in a strong growth area (sometimes down to local infrastructure like Crossrail) or an accessible location or is near a university or hospital, which can support good rental returns.
What are your expansion plans for the platform?
Our immediate goal is to work towards our mission of establishing a liquid platform for property investment and development capital. To achieve this we need to be very focused, acquiring all types of real estate in volume and building our sales channels to increase platform liquidity so we can scale significantly.
We want to lead the market for software and user experience, so must maintain high levels of investment in our technology and R&D initiative as well as continually listening to our customers’ needs. Should we achieve the goals we have set of the UK, we will then turn our attention to expanding into other territories.
… and finally does the name ‘British Pearl’ have any symbolic meaning?
We hold ourselves to the highest standards in everything we do and “British” encapsulates that. Further, this country has a huge affinity with property.
We are also focused on creating a beautiful experience and building wealth for our customers, symbolised by “Pearl”.