Uma Rajah: CEO at CapitalRise, a UK based Prime Property Lending Platform, Reveals how Company Is Scaling its Business Model

We recently caught up with Uma Rajah, CEO and Co-founder at CapitalRise, a UK-based prime property lending platform. CapitalRise is an investment platform that seeks quality over quantity with just 2% of deals being approved by the platform. Sophisticated or high net worth investors may participate in offerings for as little as £1000 in both debt and equity deals.  CapitalRise also hosts a bulletin board where investors may sell existing investments.

Rajah talked about how her company has been maintaining and scaling its business operations during the COVID-19 pandemic. Rajah also discussed the company’s strategic plans for 2021 and offered insights on the UK’s prime real estate sector, which is quite a niche market that offers many lucrative opportunities for borrowers and investors.

Our discussion is shared below.

Crowdfund Insider: CapitalRise has provided approximately £92 million in loans and you’re now on track to reach the £100 million lending milestone at some point in 2021. You also mentioned that there’s been a significant increase in demand from borrowers and lenders on your platform. Please tell us how you were able to effectively manage and maintain operations throughout the COVID-19 pandemic this year.

Uma Rajah: We’re a Fintech business, so our move to company-wide remote working was implemented overnight, with no impact on our operations and service levels. Operationally and culturally it was also very straightforward especially as we have a super-motivated high-quality, close-knit team. We also successfully onboarded five new employees remotely between May and August, including creating two brand new roles.

Our strong relationships with our existing borrowers (Prime property developers), investors (retail and institutional) and brokers, also continued as normal. While some of our developers naturally experienced delays in their projects during this period, we worked closely with them to ensure the completion of their projects while keeping our investors informed of progress. It is a testament to our business model and proof of the robust nature of the UK Prime property market that we maintained our proud record of zero defaults since our inception during 2020.

For us, 2020 was not just trying to maintain our solid platform, but growth remained an important part of our approach. As such, we have been able to continue to develop and grow our strong networks of Prime property developers, brokers and investors. Our experience has shown that borrowers are eager to continue to press ahead with projects.

With many banks and traditional lenders withdrawing from the property market, demand for finance from alternative providers has grown. Our unparalleled reputation and knowledge of the London and South East of England Prime market has put us in a great position to grow.

Similarly, in a world of record-low interest rates and volatile equity markets, investors are excited by the investment opportunities we offer. They know that we assiduously assess every project, that they can trust us with their investments and that we will deliver the outstanding and consistent returns we promise.

Crowdfund Insider: CapitalRise’s annual financial results revealed that the platform recorded a loss of nearly £1.5 million in the past year that ended on July 31, 2020 – which is about the same in losses that your company reported back in 2019. Most alternative lenders are considered early-stage or high-growth stage firms, so it can be expected that they post some losses as they scale their operations. Please tell us how you have been allocating resources to help grow your business.

Uma Raah: Our results were in-line with our long-term business plan of growth through solid performance and investment in key areas. As such, we grew the top line while continuing to invest sensibly. Our main areas of investment during the past year have been in people and technology, which between them are c.55% of our total cost base. In 2020 they increased by 15% and 23% respectively.

These Investments have established a solid and robust foundation for the business, and a platform from which to grow. We have successfully reached a position from which we can scale the business without significantly increasing our cost base, an important step on our journey to profitability and beyond.

During 2020, we have also grown both the size and the quality of our team. Most notably we have strengthened our lending team to give us a broader and deeper reach in the Prime property market.

This has given us a strong platform to build our business further in 2021, which we anticipate to be vibrant. We continue to develop and improve our technology, both with new products and enhancement of our existing platform. Among benefits already accruing from this, we saw a 75% increase in money invested through our crowdfunding platform during 2020. In addition we aim to launch new products early in 2021 so watch this space.

Crowdfund Insider: What is your business model? How do you generate your revenue?

Uma Rajah: CapitalRise was established with two clear goals in mind: to remove the obstacles faced by experienced property developers when raising finance, by providing bespoke, flexible and cost-effective funding; and to establish Prime real estate debt as a new investment class accessible to a wider group of investors.

Our business model is a simple one. We originate high-quality real estate loans secured on prime property in Prime Central London, Prime Outer London and the Home Counties, and offer investors the opportunity to invest in them, accruing strong returns. Our minimum investment size is £1,000. We originate only the best loans which have passed our rigorous credit process and our belief in the quality of our loans is shown by the fact that our founders all invest in every loan.

We generate our revenue through two channels:

a. Fees charged to the borrower
b. An interest margin between the rate at which we lend to the borrower and the rate which we offer to investors (the interest margin is recognised as interest income in our accounts).

We do not charge any fees to investors.

Crowdfund Insider: Which companies do you consider your competition?

Uma Rajah: We are the only Fintech lender which focuses purely on Prime Real Estate, and as market leaders, our services go far beyond what a traditional lender offers to its borrowers. We have a team which understands this market inside and out, and this benefits borrowers in the support we can give them for each and every project, and investors in the due diligence we apply to all prospective projects. This approach has gained us a strong market reputation for having unrivalled understanding of all the nuances of Prime development.

While there is no single competitor that is focused on this market, there are lenders – such as banks and P2P platforms – that of course lend to Prime developers. However, their services and support in no way replicates our approach.

Crowdfund Insider: What do you consider your biggest challenges as a company moving forward? What are your plans and expectations for 2021?

Uma Rajah: London will remain an attractive place to live and do business, and we believe there will be a thriving market for prime property here and therefore dedicated Prime developers for us to support. This enables us to offer strong rates of return which continue to be attractive to investors.

We have performed extremely well during the COVID-19 pandemic and Prime London has consistently proved itself the most robust area of the property market and has recovered from downturns faster than any section so we believe we are well-positioned.

In 2021 we expect to continue on our growth trajectory. We aim to grow our loan book, increasing both the size and quantity of loans. We are also in live negotiations for institutional funding lines which will provide us with available capital to fund this increased loan volume. We have the team, the tech and the track record to capitalize on the investments made in the business to date.

Crowdfund Insider: Please tell us what the impact of Brexit has been on your business.

Uma Raah: As a UK-based business, the impact of Brexit has been fairly minimal. It is the case that, amid uncertainty, some bigger players have retreated from real estate lending and we have taken advantage by establishing ourselves and an excellent reputation as a leading lender of choice in the Prime Real Estate market.

Crowdfund Insider: Can you comment on Mezzanine v. Senior Loans – (% of deals)?

Uma Rajah: Since inception, approximately a third of our loans have been mezzanine with the rest senior. Our current loan book has a slightly higher percentage of senior loans but we remain very active in both markets.

Crowdfund Insider: Who are your pre-funders?

Uma Rajah: It is very important to our borrowers that they have certainty of funding, so unlike some other platforms we pre-fund our loans to ensure that our borrowers have access to the funds in a timely manner and then we can take our time to prepare the offering to our investors. We have a number of pre-funding facilities which include using our own balance sheet and facilities provided by pre-funding partners.

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