A project to develop 16 houses in Pallaskenry, Co Limerick, is well on track to raise the €2.4m in funding that it pitched out to peer-to-peer investors just a few weeks ago, having very quickly raised the first tranche of €665,000.
PropertyBridges.com, who are leading the financial management of the project, will raise the remainder in three further tranches when
the development progresses over the next 12 months. PropertyBridges.com was launched last October by David Jelly, James Twomey, and Marc Rafferty with a plan to tap into some of the €100bn sitting in Irish deposit and savings accounts by enticing ordinary people to invest in property development. It already has projected up and running in Dublin, Kilkenny, and Waterford.
Property Bridges is set to announce a big-name finance partner next week, who is to cover 30-40% of the loan in each project. Enterprise Ireland has given high-potential startup (HPSU) funding to Property Bridges.
Property Bridges itself oversees every aspect of the project, stands over the developers it works with and ensures its investors get their money back within the agreed timeframe. Its own assessments are then independently assessed byOCFPM Property Development Solutions.
The model has clearly struck a chord with people, who can invest a minimum of €500 or up to a maximum of €100,000 and get their money back plus 8.5% per annum interest within 16 months (effectively 11.3% for the 16-month loan period). For the individual lender, the alternative is effectively to accept near zero returns from their bank.
The key people behind Property Bridges are a mix of financiers, entrepreneurs and experienced developers. Marc Rafferty is a founder of Linkedfinance.com, which just a month ago hit the €100m milestone setting up 2,160 loans to SMEs in Ireland; it now plans to double its staff from 25 to 50.
The two peer-to-peer business models are fairly similar, basically inspiring ordinary people to invest in small businesses and now small housing projects either ignored or rejected by the banks. The difference is that Linkedfinance might lend €50,000 to the owner of a bicycle shop, who then makes monthly repayments.
With PropertyBridges, the loans are bigger and require a higher level of oversight on the management of the loan. In both cases, the models are working. The property lending business has really hit the ground running.
“The business is flying,” said Marc Rafferty. “There are a lot of builders out there who who want to develop small and medium-sized sites. We’re here to help them, and we’re here to look after the interest of our lenders.”
While peer-to-peer lending may once have been new to many people, that has all changed in the decade since the global banking crisis. The speed with which investors bought into the Pallaskenry housing project tells its own story.
“The project attracted 276 people to offer loans,” said Marc Rafferty.
Some came in at €500, two came it at the maximum of €100,000. The average of around €3,000 was very close to the average for the previous two projects.
“You’ll get some dipping their toes in, a few high net worth individuals who are savvy enough to see the good value it represents, and the rest somewhere in the middle. We saw the same with Linkedfinance, which started small and now now managed over €100m in peer-to-peer loans to SMEs.
“With Pallaskenry, we have some people who are from Limerick who just want to invest locally, and then right up to those high net-worth investors.”
Pallaskenry is a scenic village 20 minutes away from Limerick’s main business hub, the Raheen Business Park. Raheen is home to some of the world’s best companies, Dell, Regeneron Pharmaceuticals, Stryker, Analog Devices and ON Semi-Conductor.
In this project, the borrower is a highly experienced developer from Co Limerick. They have requested a development facility of €2.4m for a period of 16 months (six months minimum), secured against a site that they are currently developing. The funds will be used to construct the 16 houses.
“A lot of the people investing with us realised that they’re effectively getting nothing in terms of interest back from the bank,” said Marc Rafferty. “They might be someone with €20,000 sitting in an account and they decide to invest €1,000 or €3,000 of that with us.” If a person invests €10,000 for 16 months, they get €11,130 back, including their 11.3% interest. Those two high-net investors in Pallaskenry will earn €11,300 within the timeframe.
“Our job is to evaluate the risk from all sides and to make sure that everyone gets paid within 16 months,” said Mr Rafferty.
We have a lot of projects in the pipeline. We expect to reach 100 projects within the next three years. We currently have 2,000 lenders and our goal is to have 10,000 lenders by the end of this year.
“With Linkedfinance, the public wanted SMEs to survive, but the banks were just not lending to them,” he said. “Some people felt they wanted to do their bit, while getting a return. With PropertyBridges, we are helping those developers that the banks won’t help.
“The banks will work with developers on projects with 100 or more houses, but they won’t help the smaller developer with a small housing project. Of course, we have to assess every aspect of the risk, and be ready to step in to protect the lender’s interests.”
The builder in Pallaskenry will access the €2.4m loan in four stages, once the project reaches the build milestones, namely site development, built structures, water tight houses and finished homes.
Property Bridges is led by two people from finance backgrounds and three from construction. Their assessments are then independently verified by OCFPM.
The project to develop seven houses in Kilkenny is interesting in that all of the houses are pre-sold to Kilkenny County Council. In recent years, it has become very rare for Irish local authorities to develop their own housing projects.
Property Bridges looks like it could become an even bigger business than Linkedfinance, if it hits its target of 100 loan projects within three years.
If each project averages €1.5m, the 100 projects will become a €150m loan business within three years. In terms of the social benefits, that equates to 3,000 new houses.
“The timing is perfect,” said Marc Rafferty. “People need houses, and the developers who want to build houses can’t get the financial support they need. We’re getting the developers the finance they need, and our investors are getting a return that they’re not getting from the banks. Everyone wins.”