A round table discussion held by the Centre for the Study of Financial Innovation in London on 26 April 2016 featured presentations from new online marketplace platforms offering opportunities in the UK commercial real estate (“CRE”) sector:
- Landbay, a peer-to-peer lending service for portfolio landlords of residential buy-to-let mortgages;
- LendInvest, a provider of CRE bridging loans, funded by a combination of institutional investors and an online marketplace platform; and
- Proplend, a peer-to-peer lending platform offering a CRE syndicated loan model for retail investors.
The consensus of the panel was that these platforms were providing a means by which retail investors could directly invest in an asset class previously unavailable to them, leading to increased access to indirect ownership and investment in the UK property market – accessing real estate by means of financial instruments. In addition, technology is increasingly being used to streamline pricing and the administrative process; investors lending through Proplend, for example, sign up to standardised terms and conditions designed to reduce the administrative burden and speed up the lending process.
The credit teams for these business models and their assessment of risk are essentially traditional. The industry is awaiting the emergence of a new technology-based analytical tool for assessing CRE risk. However, there is the potential that, as the businesses in this marketplace grow, increased investment in their technology could lead to innovation. A key aspect of “PropTech” is the accumulation of large quantities of data concerning both the loans entered into and the parties to those loans. The combination of technological progress and these databanks should create opportunities to improve approaches to both credit and risk assessment, as well as hopefully allow for greater transparency in the online lending market place.