Uma Rajah, chief executive and co-founder of CapitalRise, explains how the platform chooses its loans…
IT’S NOT EASY maintaining a loanbook which has no defaults or losses to date. But prime property lender CapitalRise has turned loan selection into a fine art. An art that has helped return over £4m to investors to date.
CapitalRise only lends against prime property developments, predominantly across prime central London and the Home Counties – and that’s not by chance.
“Prime central London is the most resilient part of the UK property market,” says Uma Rajah, chief executive and co-founder of CapitalRise.
“If you look at the last 50 years of data, you can see that after the 1989 and 2007 downturns, prime central London property bounced back at least three years faster than wider London and the UK overall. In fact, prices in the rest of the UK are only now approaching pre-2007 levels.”
The team behind CapitalRise’s bespoke selection process has unparalleled experience when it comes to the prime property lending market. The people who screen the platform’s deals have been in the sector for at least 20 years and bring very specific knowledge of these assets and locations, which gives CapitalRise a big advantage in a competitive market.
There’s no shortage of developers seeking finance in London, so the big challenge is whittling down the longlist to a small selection of viable investments.
“We look at supply and demand in particular, because we don’t want to be lending to a project where there’s already oversupply in the market for those assets,” says Rajah.
“We review the developer’s appraisal thoroughly – from timescales to floor plans, assessing whether what they’re proposing to do is sensible, realistic, and has a clearly identifiable target end-user market.
“We then look in a lot of detail at the track record of the borrower. This includes obtaining references, making site visits and reviewing their previous projects to see if they can achieve the quality levels that you need for these kinds of projects.”
With all this information to hand, the team will then assess the viability of the opportunity, before engaging third parties to complete a valuation and survey and finally to draft a loan agreement.
All this completed, the CapitalRise team begins a “very detailed financial analysis,” to ensure the project’s parameters are suitably stress-tested and affirmed.
“It’s so important that the borrower has skin in the game – they need to put at least 10 per cent of the costs in themselves, and that’s non-negotiable to us,” explains Rajah. “The reason why a loan often won’t proceed to formal credit committee approval is that the borrower hasn’t been able to secure the equity required to make the deal happen.”
With such a strict selection process, it’s only natural that CapitalRise rejects more than it approves. In fact, Rajah estimates that within the last six months, the platform declined more than £1.3bn worth of loans.
However, when you have an unblemished track record and a team of industry experts, you can afford to be a little more selective. In fact, testament to their belief in the quality of CapitalRise opportunities, Rajah confirms that the founders of CapitalRise personally invest in every single one.