littleoldlady
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Post by littleoldlady on Jun 21, 2016 18:19:54 GMT
Can anyone see any advantage in this? (email received today)
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ben
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Post by ben on Jun 21, 2016 19:52:31 GMT
Can anyone see any advantage in this? (email received today) Not enough information at the moment and what the security will be in case of defualt. It looks just like a bond to me but will wait and see,
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littleoldlady
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Post by littleoldlady on Jun 21, 2016 20:25:03 GMT
Wait for what? My reading is that there is no property security, just the solvency of the platform itself, and they want an expression of interest now. We don't even have any accounts for PM to judge how solvent they are.
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ben
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Post by ben on Jun 21, 2016 20:37:02 GMT
Wait for what? My reading is that there is no property security, just the solvency of the platform itself, and they want an expression of interest now. We don't even have any accounts for PM to judge how solvent they are. I assume its not actually PM itself that they want investing in. From reading the email they are setting up a seperate company Property Moose Finance A (PMF A Ltd) which they want us to fund basically so they can buy the properties prior to them being sold on to the investors. Quick google has Property Moose Finance set up last week. Where the profit comes into it though I am not quite sure. This will save them paying the 3% to investors whilst waiting to be funded but seems an expensive way to do it.
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j
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Post by j on Jun 21, 2016 23:07:36 GMT
Initially, I thought it was along the lines of bridging loans that thc have been doing for a while but, having read again, it doesn't sound like it! As it stands, not for me as PM seems to make a bigger part of the profit, whilst we take on the risk if things fail. Unless propertymoose like to elaborate on it more on these pages? |
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littleoldlady
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Post by littleoldlady on Jun 22, 2016 7:57:07 GMT
I assume its not actually PM itself that they want investing in. From reading the email they are setting up a separate company Property Moose Finance A (PMF A Ltd) which they want us to fund basically so they can buy the properties prior to them being sold on to the investors. Quick google has Property Moose Finance set up last week. You are right. So we are lending to a ltd with no assets or track record whatsoever. However I cannot believe that PM would allow the new ltd to become insolvent whilst the holding company remained solvent as it would surely cause platform collapse - except why else set up a separate ltd?
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pom
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Post by pom on Jun 22, 2016 8:30:28 GMT
My initial reaction was I trust them enough to be interested but I had some questions (as to where the money would be coming from to pay the interest, whether it would increase costs to investors etc)....which they've now answered. Seems to me that it's all about cutting out the middle men who buy/rennovate the properties before we get them, so win-win as far as I see it, help make future investments cheaper for all the investors, help PM grow and make money out of it, so I'm definitely in. Yep so it's a new thing for PM so potentially risky and I'm sure they'll be aiming to make a good cut too, but what else is new?
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j
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Post by j on Jun 22, 2016 8:54:34 GMT
pom, did you contact them directly to get answers as I cannot find any info via website or email sent yesterday?
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Steerpike
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Post by Steerpike on Jun 22, 2016 9:00:34 GMT
From the email:
"raise funds to allow us to secure these properties, complete any required work and launch them on the website for funding – giving you better potential returns and more choice"
Perhaps I have misunderstood, but the loan seems to me to be for working capital and I don't understand the exit strategy.
PMFA raises let's say £200k and buys a handful of properties to renovate and as each property is completed it is sold and replaced with another.
It seems unlikely that PMFA will make £216k profit in 12 months and so it appears that exit could be a) refinance b) rollover c) close down.
a) might be possible at a lower rate because the business will have a track record
b) if this is the intention, then perhaps investors should be clear that this may not be a 12 month term
c) seems to be pointless
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pom
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Post by pom on Jun 22, 2016 9:24:10 GMT
pom , did you contact them directly to get answers as I cannot find any info via website or email sent yesterday? From the email "and if you have any questions, please do get in touch!" so I replied 
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pom
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Post by pom on Jun 22, 2016 9:33:47 GMT
From the email: "raise funds to allow us to secure these properties, complete any required work and launch them on the website for funding – giving you better potential returns and more choice"Perhaps I have misunderstood, but the loan seems to me to be for working capital and I don't understand the exit strategy. PMFA raises let's say £200k and buys a handful of properties to renovate and as each property is completed it is sold and replaced with another. It seems unlikely that PMFA will make £216k profit in 12 months and so it appears that exit could be a) refinance b) rollover c) close down. a) might be possible at a lower rate because the business will have a track record b) if this is the intention, then perhaps investors should be clear that this may not be a 12 month term c) seems to be pointless At the moment there are 3rd parties out there making a tidy profit by buying properties at auction, renovating them sufficiently to make them rentable and then selling them via PM to us the investors. Idea is that instead, the new PMFA will do this instead, would likely only need a couple of deals to make enough to cover the interest (cos these 3rd parties aren't doing it for charity)...and will be constantly recycling the money as PM SPVs fill up, and so over the year will then be able to sell them on the platform to investors much cheaper than currently, so all returns will increase. Unless they suddenly lose all their investors and can't sell the projects the exit strategy is not going to be an issue (and if that happens there will likely be bigger issues for the platform as a whole) - personally the question I have out to them currently is do they have any ideas what they might do beyond the 12 months (cos I will likely want more).
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j
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Post by j on Jun 22, 2016 9:35:24 GMT
sorry, may not have made myself very clear what info I wanted but it is along the lines of what Steerpike mentioned. The exit strategy, what happens if the forecast profits do not match up to real ones (ie how will they pay 8% fixed pa), length of term, will they bypass rental options completely, etc. Too many unknowns so, will probably email to dig deeper. |
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pom
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Post by pom on Jun 22, 2016 9:42:24 GMT
sorry, may not have made myself very clear what info I wanted but it is along the lines of what Steerpike mentioned. The exit strategy, what happens if the forecast profits do not match up to real ones (ie how will they pay 8% fixed pa), length of term, will they bypass rental options completely, etc. Too many unknowns so, will probably email to dig deeper. The 8% comes from depriving the middlemen of their cut. Investors are currently probably already paying out this per deal....therefore spread over a year of deals it means much cheaper properties on the site even after paying us.
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j
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Penguins are very misunderstood!
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Post by j on Jun 22, 2016 9:50:07 GMT
sorry, may not have made myself very clear what info I wanted but it is along the lines of what Steerpike mentioned. The exit strategy, what happens if the forecast profits do not match up to real ones (ie how will they pay 8% fixed pa), length of term, will they bypass rental options completely, etc. Too many unknowns so, will probably email to dig deeper. The 8% comes from depriving the middlemen of their cut. Investors are currently probably already paying out this per deal....therefore spread over a year of deals it means much cheaper properties on the site even after paying us. I got that bit but, my concern is how accurate their rics vals are/will be & in turn how that would affect the guaranteed 8% + their profit margin on top. what happens if a few deals fall quite short of PM's expectations, how will/can they make up the difference to pay the guaranteed 8% without much effect on their own cashflow/survivability?
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Post by propertymoose on Jun 22, 2016 9:58:21 GMT
Hi all Thanks for the questions. As Pom points out, if anyone has any specific questions they can get in touch with the team. The purpose of the email was just to gauge initial interest levels which, so have, have been great. Hopefully, I can help answer the points raised so far: 1) The funds are being raised by PMF A Ltd which is owned by Property Moose Finance Ltd ("PMF"). The reason we have structured it in this way is due to the underlying requirements of our main VC investor who manage funds which include money from the European Investment Bank and have restrictions against holding property. Any issues in this business would reflect badly on the whole business. I hope everyone here appreciates the level of effort we go to to ensure transparency and trust in the platform - this has not changed! 2) Investment will be by way of secured loan note which has been drafted by external lawyers and will be made available in due course. This loan note is secured against the assets of PMF A Ltd by way of debenture (registered at Companies House) with full look through security to the underlying assets. The reason we have done this is to provide a security net around the assets of PMF A Ltd so that the investors in that loan note know that the funds they invest will only be used for the purposes outlined below - therefore providing a potentially different risk profile than other PMF SPVs that we may operate in the future. 3) The assets of PMF A Ltd will initially be the cash raised from the loan note. There are no liabilities in PMF A and no salary or staff costs on an ongoing basis. The funds will then be used to incorporate and lend funds to a PM SPV to acquire a property for the platform - allowing us to move quickly and cut out the middle man. 4) The loan the PM SPV will be made on a fully secured basis by way of (i) first charge against the property being acquired and (ii) a debenture (fixed and floating) against the SPV. This loan will carry a market interest rate which will allow us to then accrue and ultimately pay the 8% interest to the investors in PMF A Ltd. From our model and current run rates, an excess will be made in PMF A which will allow us to pay costs and expenses of operating PMF A and ultimately continue to secure property for our members. 5) Each property will go through the usual Property Moose DD process (including investment committee and credit committee approval) and we will, therefore, be confident that it is being acquired at sufficient discount to market value and is attractive to our members to give us comfort that we will successfully then fund it on the platform. Once the funds are raised, the loan will be repaid to PMF A and the cycle continues. 6) The structure of the product has been built following our experience in the market (over 3 years now!) in addition to our working with external lawyers and advisers. Many of you will know that we have the benefit of our exec-Chairman, Darren who has extensive senior banking experience having helped launch Metro Bank (ex-MD and founding board member for launch), previously been head of corporate for HBOS with a loan book of several billion pounds and having exited a number of financial services businesses he founded. We have built this product for the benefit of everyone - more property, better deals, more returns, safer investments = growth! 7) There is mention of comparing this to bridging loans. In effect, it is. However, it is very different to third party bridging as seen on some of our competitor's websites. From my understanding, their product is second charge lending to third parties so gives very little underlying security. If the first charge holder wants to call in the loan, the second charge holder has no chance as the bank will just want to recoup their money as quickly as possible. Our proposition is lending money to our own internal SPVs and we are in control of the whole process with funds always being directly protected by property. It is for everyone here to make their assessment of risk. 8) To be clear, this is not a loan to the business for operational expenses. 9) The track record of PMF A Ltd is nil. However, this is operated by Property Moose with the benefit of our team and experience to date from sourcing and acquiring over 50 properties to date. The process will not change, all this means is that we do not need to use third parties to secure properties thereby removing their need to make profit and helping us to secure a better pipeline with better discounts. 10) I hope that helps! I am actually away from Thursday afternoon until Monday evening with very little access to the internet but the team are around if anyone wants to ask any further questions. Or, I will review and reply next week. Kind regards Andrew p.s - the whole purpose of this fund is to allow us to secure properties quicker and at greater discounts to RICS for our members. It also means we can take stock that, ordinarily, passes us by as we don't have the cash ready to move quickly. All of this is great news for our members and will lead to increased returns, better stock and more diverse opportunities. |
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