CapitalRise is a property lender which focuses on high value properties. Each loan on the platform is issued as a separate bond which is offered to retail investors and eligible to be held in an IFISA. Over the past year we’ve caught up on numerous occasions with CapitalRise and given their unique approach to the market we wanted to share an interview with their CEO, Uma Rajah.
Can you provide an overview of CapitalRise?
In a nutshell, CapitalRise is an online prime property lending and investment platform providing returns of circa 10 percent per annum.
You can invest from as little as £1,000 and your money is legally secured by the property asset being funded. Our investments are expertly chosen by a team of experienced property professionals, and developments funded to date include Prime Central London properties in Eaton Square, Grosvenor Square, and the Strand. We connect our members, (who can be individuals and companies) to the finest real estate investment opportunities and deliver market-leading returns of on average more than 10 per cent per annum. Importantly, their investment returns can also be tax free if they invest using the CapitalRise ISA.
Why did you start the CapitalRise and what was your biggest challenge in launching the platform?
Launched in 2016 by Alex Michelin and Andrew Dunn, the founders of Finchatton, a property development company. CapitalRise was created out of frustration with the challenges that property developers face when seeking quick, reliable, and cost-effective finance for projects.
I joined as co-founder with over a decade’s experience in fintech and in particular, developing consumer financial products. For me, what is so appealing about CapitalRise is that we are able to offer everyday investors an opportunity that traditionally could only be accessed by high net worth individuals, and also at the same time, solving the funding headache for developers.
One of the challenges for CapitalRise is ensuring that we are communicating with two different audiences at the same time; property developers, in order for us to have a fantastic pipeline of property deals for our members, and also the everyday investor and institutions, ie our members. Members can invest from £1,000 with us.
What type of loans are the platform’s sweet spot?
We’re able to provide developers with both debt and equity funding. We cover the full range of the loan lifecycle from bridging loans, through development loans to sales period loans. We only focus on lending to experienced developers who are developing prime assets in prime locations. Previous loans have included locations such as Eaton Square, Grosvenor Square and the Strand. In addition to Prime London locations we also focus on prime home counties and commuter belt locations.
Loans are typically 1-2yrs in duration and the security package varies depending on the type of loan. We offer senior loans which would have a 1st legal charge against the property asset and mezzanine loans, which would have a 2nd legal charge, as part of the security package.
Barriers to accessing opportunities are remarkably low. Our automated investment process enables the platform to cost-effectively source funds from many smaller investors, compared to traditional fundraising methods where the minimum investment amounts are in the millions. You can sign up on our platform in minutes.
CapitalRise focuses on property developments which are typically in highly desirable areas. Borrowers are more sought after in these areas so why borrow from CapitalRise?
One of the things that makes CapitalRise unique is that our loan products are built by developers for developers – we understand the pressures that they are under. This means we make the process as frictionless as possible for developers and offer a range of solutions to meet their needs, for example we recently introduced a development exit loan product which was very well received – we were flooded with enquiries after we launched it.
We also offer bespoke and flexible terms to suit each particular property we lend against. This makes us a more appealing option for developers than traditional sources of finance.
By having a rigid focus on these prime areas is CapitalRise restricting deal flow and ultimately the scalability of the business?
We focus on Prime locations which covers quite a broad area with high transaction values, as well as Prime Central London we focus on Prime North London, South, West and East. We focus on Prime locations in the Home Counties and in the commuter belt, such as Winchester. We also consider Prime locations outside of the South East for example recently closing a transaction just outside Leamington Spa.
I am not concerned about scalability, as the market we target is very high in value compared to other sectors, for example a property loan for Prime Central London might be for £30 million for one loan. But you are right, our platform will have fewer, but larger loans than those platforms that focus on mainstream or low- end property lending.
Some financial commentators have said we are in a property bubble, particularly in areas of high property prices such as London? What are your views on this?
Prime Central London prices peaked in November 2014 and prices are now down around 20% from their peak. The industry view which we support is that we are either at the bottom or near the bottom of the cycle now and the forecast is for compound growth of 20% to 2022.
Now is exactly the perfect time for us to be building our loan book, it is a great time for developers to be able to buy assets at good prices allowing for more profitable projects. Also as a lender we always lend against an independent 3rd Party Red Book Valuation which at this stage in the property cycle do tend to be very conservative. If we are lending at a typical 66% Loan to value (LTV) ratio against a property value that is a conservative valuation that offers a much safer position than when the market is booming and prices are racing up and valuations get stretched.
This LTV means the anticipated sales price would have to drop by more than 34% for our investors’ funds to be at risk. Bearing in mind prices are already down 20% from the peak, this is a very unlikely situation. As an example, the greatest peak to trough fall in Prime Central London Prices in any downturn since data records began in the late 70s was 25%.
What separates CapitalRise from its competitors and why should investors sign up to the platform?
I don’t think there is anyone out there who is doing what we are doing – it’s a pretty unique model matching members to prime real estate investment opportunities. We have proved that the model works – over the past 23 months we have already paid out £2.2 million back to investors. We charge no fees to invest, so investors can access very attractive risk-adjusted returns of 8-12% per year, with their money secured against prime property assets.
I notice you have just raised £2 million to fund the business. Congratulations. What do you hope to achieve with this fundraise and how will this benefit investors?
Thank you, we are delighted to have completed the fundraise with the Family Office of Rana Kapoor, the founder of Yes Bank, India’s 4th largest private bank. They will be an excellent strategic adviser for us as we enter the next phase of growth. This particular round will support the company’s fast paced growth and go towards expanding our team and opening up new property investment opportunities in sought after locations in the UK.