CrowdProperty has decided to open its new mezzanine finance product to high-net-worth (HNW) and sophisticated investors only, as it is a “higher risk product” that is not suitable for retail investors.
The peer-to-peer residential development lender launched CP Capital at the end of March to provide second charge finance to property developers and it was initially funded by private sources of capital.
CrowdProperty’s original offering of first charge development finance projects is still open to retail investors.
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Chief executive Mike Bristow said the decision to restrict CP Capital to HNW and sophisticated investors was a business decision, rather than a regulatory one.
“Mezzanine finance is a higher risk product and requires closer inspection and understanding of the loan and the asset class,” he told Peer2Peer Finance News.
“We chose to restrict that availability to that market, so we are very comfortable that our investors understand the additional risks associated with mezzanine finance and the loan itself and review that carefully.
“Retail investors can invest in CrowdProperty but not CP Capital. It’s our decision and proposition and not a regulatory requirement, it’s just we’ve targeted that product at that market.”
Bristow said CP Capital was launched in response to customer demand and seeing that the existing mezzanine market is poorly served.
CrowdProperty only provides CP Capital mezzanine finance for loans where it has already provided the first charge. Bristow said this can save developers time and money as they have one single point of contact and single valuation, monitoring, and legal fees.
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