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LONDON — House crowdfunding platform Property Partner has grown the value of properties it manages by 74% to £100.7 million this year after changing its business strategy to target high-value investors and buying big-ticket student accommodation blocks.
The platform, which launched in early 2015, allows investors to buy a small chunk of a rental property for as little as £250. It differs from the mortgage-backed securities that drove the global financial crash in 2008 because investors choose a specific property to invest in from a selection listed on its website, rather than purchasing an obscure financial product.
CEO Dan Gandesha said this year's rapid growth was driven by a decision to target high-value investors for stakes above £25,000 and by purchasing purpose-built student accommodation, an asset class which is creating a buzz because of the high returns it offers.
"It's now not uncommon for an investor to invest a six or seven-figure sum on the platform, whereas we very much focused our marketing efforts on the smaller check size in the early days," Gandesha told Business Insider.
"It's a fairly common evolution within the fintech sector where a platform will start focusing on relatively small ticket sizes and then scale to the point where institutions are using the platform.
"On day one, when you have no platform and no customers, it's really difficult for a large customer to come along and deploy capital on your platform, because they would be too exposed."
The average investment on the site is now £6,000, but Gandesha said that "misleading" figure obscured the clusters of investments at two ends of the spectrum.
"We've got a lot of smaller customers investing relatively low sums of around £250, and and we've got customers in the seven figures. Our marketing efforts these days are targeted at customers that are likely to invest upwards of £25,000 with us, and quite often significantly more," he said.
The firm has also tapped high-value investors to purchase several purpose-built student accommodation blocks (PBSA), which are creating a buzz within the property investment sector because they currently offer the highest returns of any UK property class — around 6% after fees on Property Partner's platform, compared to returns of around 3.5% for residential investments.
Gandesha said PBSA was also attractive to investors because it is counter-cyclical, meaning it would be well-positioned to weather the storm of a downturn in the UK property market.
"In a recession, it's quite common that because there are fewer jobs available in the market, people will be more likely to go to university or extend their existing studies at university. So you tend to see admissions demand go up, which then gives the asset class a different profile compared to residential property," he said.
Gandesha did not disclose growth targets for next year but said it was aiming for "strong" growth, although he does not expect to maintain this year's rapid expansion.
"In the last four months we're been growing at 36% month-on-month," he said. "We don't expect that to carry on over the long run but we are aiming for a strong growth rate."
Business Insider reported in July last year that the firm laid off 13 of its 44 staff, citing "a growing theme of caution" across the global start-up community and concerns about profitability and high valuations among tech startups.
Gandesha said the decision was "with hindsight the right thing to do, even though it wasn't an easy thing to do," adding the firm has now added 15 staff to bring its total headcount to 46.
Property Partner's business represents a bet on property values and rents remaining robust in the wake of the UK's vote to leave the EU, despite a slowdown in price growth this year.
Gandesha said he didn't expect an imminent downturn outside of London's prime central zone — where prices dipped furthest this year — citing the fact that UK house prices are expected to keep growing in the near-term, albeit at a slower rate.
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