In The National's money section this week, we featured The Property Hub Meetup - a group of UAE residents who regularly meet up to discuss their real estate portfolios. The group's main focus is investing in the UK and some of the members have sizeable portfolios.
But with buyers needing deposits of between 25 per cent and 35 per cent to secure a UK mortgage, it can be a sizeable amount to raise.
However, those who cannot afford the deposit can still profit from UK property, thanks to a crowdfunding site. Property Partner, which launched in January, offers the chance to invest as little as £50 (Dh226) in any single asset on its books. It has 263 funded units worth around £55 million on the site and around 8,500 investors in total. It has raised £39m from investors since launch. Here, Mark Weedon, head of institutional development and head of research at Property Partner, explains more about the concept:
How does it work?
We send out a notification to our investors to say we are launching a new property. At the moment we are launching a new property every week. And there is a funding period where they have the opportunity to reserve shares on the property. Now the structure of the investment is that every property is a separate entity. So they are not depending on each other and they are not depending on Property Partner the group. They are all owned by a UK limited company called a Special Purpose Vehicle [SPV]. What they buy is shares in the SPV. They are a limited company divided into a million shares and the can buy as much of that from £50 up to 20 per cent of the entire value. From a legal title point of view what they own is shares in that company that owns the property.
So what happens once it is fully funded?
We use the investors’ capital to buy the property from the vendor. We don’t ever buy it ourselves. And at that point it goes from being an opportunity that is marketed as a primary listing to being a fully funded property on our secondary marketplace. One of the most exciting things about Property Partner is that people can actually trade the shares in the properties [on our secondary marketplace], and whenever they want the existing investors can list them for sale at a price of their choice. So every individual company is behaving like an entity that is listed on the stock exchange. In fact, what we have built, and what our ambition is to become, is a global stock exchange for property investment.
What happens if you don’t get enough investors?
Well once we have committed to a purchase, we are indeed committed to a purchase. So there have been one or two occasions, and I do stress it is very unusual, where Property Partner has had to step in and buy a few shares to fully fund the deal. But that has only happened rarely and what we can do is just slowly put all those back on the secondary exchange at par value.
pf@thenational.ae
