Interviewed Company: Brickowner
Sector: Property Investment and Fund Management
Interview Thursday 13th July 2017
Interview with Fred Bristol
Subjects: property investment, fund management, Brexit, disruption,
Fred describes Brickowner as a “property crowdfunding platform” in the property investment and fund management industry. Brickowner provides its users with the ability to invest in properties, managed by experienced property asset managers, that they wouldn’t otherwise be able to access.
Brickowner also gives people who may otherwise not have conventional access to the UK property market, such as expats, a service that they can “access outside traditional property and asset management hours.”
This flexibility is further shown in Brickowner’s plan for a secondary market, which Fred hopes to fully implement after his current seed fundraise is completed. The secondary market will allow “property asset managers to aggregate smaller investors and offer a liquidity mechanism prior to the end of the property investment term, via the Brickowner platform.”
Fred explains that currently, “investors hold shares for 4-5 years.” However, with Brickowner, once the secondary market is launched, investors will be able to put their shares up for sale in the property prior to the sale of the property.” “The (secondary) Brickowner platform will allow them to sell shares within the property during this period.” Giving their clients “access to institutional grade property investments” with the added ability to exit early should they wish.
Fintnews: How has Brickowner viewed the impact of the Brexit decision?
Fred believes that in terms of the impact of Brexit on the UK property market, “London has had the biggest and most obvious impact due to the large amount of foreign investment it recieves” and outside of London it’s too early to tell whether it would have an impact.
But Brexit hasn’t changed the fact that “there is a UK housing shortage full stop.” Fred predicts that overall Brexit will have a negative impact on the high end residential property market in London”, but that it is too early to know what will happen with UK wide values generally, but the fundamentals of a UK housing shortage remain.
Infact, pre Brexit, Fred tells Fintnews that he read an interesting macro analysis of the impact of Brexit by Neil Woodford “arguably the best investor in the UK…who has also invested in Purple Bricks and RateSetter” and is “heavily invested in property tech.”
The Woodford Investment Management report from February 2016 on The Economic Impact of Brexit concludes that the “impacts on London property markets are more likely to be short-term and there are longer-term opportunities from Brexit even in these areas.” Echoing the “minimal Brexit impact” that Fred and his team at Brickowner have seen.
Fred points out the positives of the significant sterling devaluation post Brexit. Fred has seen a surge in “foreign investors” due to Sterling devaluation against the Euro and Dollar, claiming that now they’d “probably get a better deal than they used to.”
Fred “launched the (Brickowner) platform at the beginning of the year” and has noted “two interesting patterns.”
“What we’ve seen is for our product a lot of British expats are interested in it and also european people living in London which again makes sense…earn pounds…investing through a platform gives them flexibility that they wouldn’t have had if they were trying to buy a property or a buy to let property.”
Fintnews: Is there a formula for creating a disruptive business model?
Fred is certain that “by default you can only disrupt something that is…broken or inefficient“…The property fund management sector is very inefficient” and Fred had already had to deal with these issues “when managing a property fund in Eastern Europe…a long time ago.”
Fred listed some of the problems that he encountered as a Fund Manager. Smaller investments couldn’t be accepted “because of the high admin costs of onboarding new investors and on going admin.” In addition, as “property is not liquid … individuals don’t want to have their money locked (in) for five years.” Fred estimates that offline fund managers “are significantly less efficient and transparent “due to ongoing admin costs for individuals.”
Technology now means that “it’s much more efficient when onboarding new investors and dealing with the ongoing administration.” Brickowner’s “system is fully automated” making it “more efficient to accept smaller increments of money”.
Fred goes as far as saying that “we would not have a business if it wasn’t for changes in technology.”
“We see existing offline property management companies” wanting to invest in new technology investment companies. Infact, Fred says that “75% of our investors come from a property background” and believes that this is because “Property Fund Managers..see problems in their industry…and want to be involved in the company that is making those changes” and disrupting their industry.
Looking to the future, Fred sees opportunities for disruption in the three key markets which are being held back by heavy “legacy issues” Fred believes that “property, banking and insurance are the three last industries to be disrupted.”
Fintnews: Is there a formula for disruption?
Fred says that for disruption to occur within an industry, you must first seek out an “industry which has inefficiency or legacy issues” and then “in order to disrupt” this industry fully, “you need to provide a significantly better service or else a significantly cheaper service.” Fred states that if the change is not significant, it won’t work “as people are lazy…look at how often people change their bank accounts” for example.
Brickowner’s online presence means that they can cater for the needs of “people’s demanding lifestyles” in a way that traditional property managers and investors aren’t able to. Fred highlights the fact that client’s “travel more and want to invest or sell investment when it suits them” and not be restricted by “local market opening times.”
Fintnews: What are your predictions for the future disruption by technology of the property investment and fund management industry?
In the property investment and fund management industry…“a lot of people who are investing through a stock broker…or directly into buy to let properties…will end up in five to six years divesting out of that and into property through platforms” such as Brickowner.
Fred informs Fintnews that you “should never have everything in one single investment” “users very rarely use one platform…use a number of different platforms” and Brickowner has around, “five competitors.” and these will increase into the future, which is no bad thing from Brickowner’s perspective and increases customer choice, key to disruption.
In the future Fred predicts that, blockchain technology could reach the property industry to “enable security” features and clients could soon be able to “sell and buy shares in property using blockchain.”