Property Partner

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Property Partner

Postby NickD » Tue Mar 24, 2015 8:36 pm

Reading Tech Crunch over my Corn Flakes this weekend, I came across:

www.propertypartner.co

At first glance, they appear to have overcome the main barriers to traditional 5 year closed ended funds in that 1) there is an exit route via a secondary trading platform and 2) you choose the specific property you would like to invest in.

Being a cynical Git, I looked further and it seems that whilst you can list your shares on their platform, there is absolutely no guarantee of there being a counter party to buy them. Yes, I know this is the case on Exchanges but it is the reason for large spreads seen on small / illiquid AIM listings.

Has anyone looked into this or invested through them?
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Re: Property Partner

Postby Nick » Tue Mar 24, 2015 11:46 pm

I wouldn't because knowing a bit about BTL I think that until housing law changes to something more rational the business is far too haphazard for this sort of mature investment market.

The people behind Property Partners carry great credentials (founders of Zoopla & Betfair) however the whole team betrays an emphasis on selling their product rather than investing well. Of the 10 senior executives only one has property responsibility, and their track record is managing £Bn portfolios for banks rather than 3 bed semis in Thamesmead.

Like it or lump it, the PRS is the preserve of individual investors, the overheads and management time are just too complex to support institutional funds, and I think that this crowdfunding idea will fail on that basis. The government would desperately like schemes like this to succeed, but they need to revise housing law before it has a hope.
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Re: Property Partner

Postby NickD » Wed Mar 25, 2015 10:26 am

Hi Nick,

Part of me agrees with your sentiment but not about PRS being too complex to support institutional investment.

As an asset class, it works extremely well in the US. Here, the main enemy is the planning system and Use Class Orders. Some of the major institutions are now buying and developing in sufficient scale to make it work and my hunch is the younger crowd won't have the same hang ups renting from familiar names. As I was pointedly told whilst flat hunting and when enquiring where I would be able to park in SE1, no one under 35 drives in London. Times they are a changing!

These guys must have spent a fortune getting FCA approval and the like so I was mildly surprised to see the low aggregate value of their portfolio to date.

I wonder if they will exist in 10 years time?
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Re: Property Partner

Postby Nick » Wed Mar 25, 2015 11:01 am

It's a sales led business model (9 out of 10 of the management team). As such it's like most of the other property propositions - making money from the froth rather than the underlying business. I would only invest if there were major legal changes to rental law which made renting less expensive from an administrative basis.
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Re: Property Partner

Postby Rob H » Fri Mar 27, 2015 12:16 pm

The cynic in me thinks that the dividends will be severely diminished by maintenance costs, management costs, void periods, repairs and of course provision thereto. All of these areas are traditionally the main money spinners for managing agents.

I perceive that they will have a degree of success as they are clearly targeting the market that wants something for nothing albeit that this is an alternative that promises something for slightly more than nothing. The similar thinly veiled promises of large returns are there as is often the case with this asset class of investment.

It would be interesting to see if the institutions get involved with investment in the SPV(s) and then effectively wrestle control from the small investors though?
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Re: Property Partner

Postby Nick » Fri Mar 27, 2015 4:51 pm

Rob,

It's a good point that they could make their money on the management - in which case maybe they could provide a decent investment (by equity standards) - say BTL with 10% return, they make a 3% management charge (probably a reasonable estimate of the cost of managing a BTL Portfolio yielding 10%) & still offer investors 7% - a good offer in the current climate.
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