Assetz Exchange

Idea

Introduction

Our mission at Assetz Exchange is to break down barriers to investing in sustainable and under-supplied Buy-to-Let sectors so that investors can create a diversified property portfolio in minutes and, in turn, create a better housing market in our innovative market segments.

Residential property is a popular asset class as it provides stable monthly cash flows, long term capital growth and great track record. It is also understandable and tangible. Nevertheless, buy-to-let has significant hurdles, such as capital requirements, administration burden and transaction costs which is why it has not been an option for many average investors.

We overcome these barriers by converting properties into micro units so only a small amount of money is required. We also take care of all administration and each property has its own market for investors to buy and sell when they want. There is also no commission and the contracts used for the investment qualify for the IFISA.

Substantial accomplishments to date

Assetz Exchange was on track with our aim of breaking even prior to the outbreak of Covid-19

○ We launched 12 properties so far in 2020, compared with 4 in the whole of 2019.

○ Properties performed well throughout Lockdown.

○ In January Assetz Exchange concluded the purchase of 4 flats in a period conversion near Sefton Park in Liverpool for £600k, with a plan to sell them on for £800k. We expect to conclude the sale of the first 2 flats for £415k shortly, meaning we are well on target.

○ The 10 Avant Show Homes purchased in February paid rent promptly throughout lockdown, illustrating the benefits of a high-quality plc listed tenant.

○ The loan for the serviced development plots is paying 9% and the first sales are expected shortly.

○ We were able to find tenants quickly for all properties whose tenancy contracts expired.

○ The platform proved robust during the disruption caused by Covid-19.

○ Most rental payments were paid promptly and prices remained relatively stable. This illustrates the benefits of not using mortgages to purchase properties.

○ Whilst there was reduced liquidity, none of the properties were suspended. Investors on Assetz Exchange were able to place buy and sell property investments throughout lockdown.

Monetisation strategy

We generate revenue by charging an arrangement fee when the property is financed and then by a fee on the rental income. Both fees are modest in order to keep yields high for investors and rents fair for tenants. It is therefore important that we:

● Keep our fixed costs low - Property is an administrative challenge. We have therefore invested in automation so we can manage more properties with the same cost base.

● Attract high quality tenants using what we believe are the right contracts.

○ We have partnered with charities that supply supported living accommodation.

○ The properties they tenant are planned to be contracted using long term full repair, maintenance leases, making them liable for these costs and keeping administration to a minimum.

○ These contracts should have the advantage of high renewal rates.

● Target great deals - The better the deal we can negotiate, the higher our income and the lower the rent.

● Innovate - We have moved into funding serviced plots which will provide a new source of homes and is an area we know well.

Use of proceeds

Assetz Exchange aims to originate over £20m of new properties in 2021, compared with approximately £4.4m in 2020. To achieve this growth we are investing in:

● A larger credit team and expanding our network of sourcing agents.

○ Properties on our platform to date have been referred to us by our sister company Assetz Property.

○ To achieve scale we also need a wider team to proactively negotiate funding of new properties.

● Marketing the platform.

○ To finance this pipeline of new properties we will require over £1m of new deposits a month.

○ Whilst we will be leveraging off our Assetz family name to achieve this target, we will also need to invest in sales, marketing and PR.

● Further automation.

○ We used lockdown to invest in automating accounting for each of the properties and we reduced the cost of administration for each property from over £700 per year to £30, substantially lifting yields for investors and making us more scaleable.

○ We will be automating all other areas of the business.

The current fund raise is at a c. £2.5m discount to our last round in October 2019. This reduction in valuation is intended to reflect the general market sentiment towards investing and the peer-2-peer sector specifically. We are also keen to allow existing investors a chance to participate in this private round at a discount to the previous round - this is not intended to illustrate any loss of confidence in the business model or the team driving Assetz Exchange forward.