Jatin Ondhia, chief executive of Shojin Property Partners, talks to Kathryn Gaw about profitability, international expansion, and a new fundraising round…
Not many peer-to-peer lending platforms can say that they reached profitability for the first time during a global downturn. But Shojin Property Partners likes to do things a bit differently. In a candid interview with Kathryn Gaw, Shojin’s chief executive Jatin Ondhia reveals how Covid has impacted the business, and why Shojin has moved up plans for a Series A fundraising.
Kathryn Gaw: How has Shojin weathered the pandemic?
Jatin Ondhia: As with all the other platforms, it was a bit of a shock and the market came to a grinding halt, but we were in a very good position going into it. We had some very good projects underway and they were only mildly impacted by Covid in terms of delays on individual projects.
Most of our projects tend to be in the development space, and construction was able to go on, albeit in a more socially distanced manner. By the summer, I would say it had almost rebounded completely and the appetite for investment in our space picked up very quickly.
KG: You turned a profit last year for the first time – what does this mean for the future of your business?
JO: We’ve always been in a very different part of the market to most of the online platforms.
Our expertise and focus have always been in the real estate development space, so when we started the business, we were doing our own developments and effectively funding them with a number of investors. Then we launched it as a model where we fund other developers, and then we launched it as an online platform after becoming Financial Conduct Authority regulated.
Now because of that, we’re in a more profitable part of the market compared to a lot of others. I think the biggest downside to a business like ours is the time lag, which means that if we launch a project today, because of the way we try and align ourselves with investors, we don’t really make any money on it until the project finishes, which could be 18 or 24 months on. There is always this period when we are covering our overheads, managing the projects, and keeping an eye on everything, but we don’t actually get compensated for quite a while. So for us, reaching profitability was brilliant because we were starting to see profits coming in from previous projects and it just helped to prove the model.
Most importantly, unlike a lot of tech and fintech start-ups, we didn’t want to be in a position when we were running losses for a very long time. I’m quite a traditionalist when it comes to business views and I want the business to be able to show it can be profitable and to do so as quickly as possible, so I think we proved that and as a result, we should be in a much better position going forward as well.
KG: Is the company on track to remain profitable in the future?
JO: Yes, I think so. A lot of it remains to be seen. We believe we should be profitable this year, albeit it might be lower than last year, simply because of some of the delays caused by Covid and some of the projects that are finishing may not finish until the next financial year.
KG: Are you planning any new fundraising activities soon?
JO: Yes. It’s funny you ask that because last year we were due to go to market with our Series A around April, and we had been working with PwC preparing for this. As soon as lockdown hit, everything froze and the whole plan had to be shelved for a while.
Towards the end of last year, we used the future fund to raise £1.7m and we were planning to go back to our Series A in 18 months’ time. However, the market conditions are perfect right now for us to go to market earlier. We’re planning to go to market with our Series A sometime over the next few weeks.
KG: What is your outlook on the P2P property sector?
JO: A lot of P2P property platforms found it hard to monetise their models or couldn’t scale in the right way. The last year caused a bit of a flush-out, and several platforms have fallen by the wayside – some of them because of clear management issues, but some of them because they couldn’t get the scale in time and couldn’t fund further growth.
I think what’s going to happen is P2P lenders are going to turn more to the institutional space, simply because it is easier and cheaper for those platforms to get institutional funding. So investors that may have done pure senior funding have already started looking a lot more at the junior space, so things like mezzanine and equity, because there you can still get the returns with a fairly well-contained level of risk.
One of the biggest things that is happening and I think will continue to happen is that you will start seeing much more collaboration across platforms and possibly even a bit of merger activity, so that costs can be shared across various platforms. The underlying cost of technology, compliance, regulation, marketing – all of these things are quite heavy burdens on a lot of individual firms, but if they come together and group that together, it makes it much more manageable.
KG: Is Shojin planning any M&A activity?
JO: We have been spearheading a plan to collaborate across multiple platforms for quite a while. We want to standardise things like the way various products are described, risk metrics, all the definitions, all those kinds of things, so that investors find it easier to pick projects across various platforms.
The idea is to create this association, to pull the different platforms together, then slowly start bringing together various other aspects, like the underlying technology, the marketing, and ultimately create a supermarketplace, which will have the full range of real estate investment.
KG: Where do you think the UK’s property market will be in five years’ time?
JO: If you look at residential, the fact is there is a shortage of housing in the UK, so I think the residential market will continue growing. It has to – it’s a supply and demand factor.
I’m also expecting to see an increase of quasi-housing schemes like co-living, student accommodation and senior living. I think those kinds of things will bring much more traction in the future, as people move more towards a rental model.
KG: Does P2P lending have a place in the UK property market?
JO: 100 per cent. What the P2P platforms are doing is opening the market up by enabling individuals everywhere to invest as much as they like, but with the confidence of knowing that the platform has done a good deal of due diligence on that project and is standing by the investor to oversee the project to make sure things are on track. Will this market grow? There is absolutely no doubt.
KG: Where do you see Shojin in 10 years’ time?
JO: Right now, we are completely UK-focused in terms of our deals, but our investor base is definitely very international. We have a lot of investors in Asia and we have an office in Hong Kong. We’ve got an office in East Africa now and we’re about to open one in India and the Middle East. Primarily, this is for investors coming into the UK market, but this model can be replicated throughout the world.