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CapitalRise Analysis

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Last updated in November 2023.

What is CapitalRise?

CapitalRise is a UK-based financial institution specializing in prime real estate investments in London. The platform provides investors with direct access to premium property-backed opportunities. Since its launch in 2016, CapitalRise has originated gross loans amounting to £308 million. They have secured funding of £219 million from the crowd, while attracting £89 million from institutional investors. In the past year, the platform funded £61 million, averaging £5.14 million per month.

Key Takeaways

  • CapitalRise offers real estate investments in London to accredited investors at a minimum investment of £1,000.
  • The platform provides the option of utilizing the Innovative Finance ISA to earn tax-free returns.
  • CapitalRise has returned over £140 million to investors, offering annual interest rates of 9% to 11.25%.

How CapitalRise Works

Investors can choose projects on the platform with a minimum investment of £1,000. Only accredited investors meeting the UK criteria are eligible. Each investment at CapitalRise is established under a separate subsidiary property company (SPV). Investors can use Finance ISA for tax-free returns, investing up to £20,000 per year or transferring funds from existing ISAs.[1]

As a regulated UK FCA company, FSCS compensation does not apply to investments. Uninvested funds held as client money are covered up to £85,000 per person under the FSCS deposit scheme.[2]

CapitalRise markets themselves as offering both debt and equity investments, yet the by far largest majority of the investments available are Senior Loans or Mezzanine Loans. Senior Loans let investors lend up to 60% of the property's value. In this scheme, capital is at risk only if the property's value decreases by 40%. Mezzanine Loans have Loan-To-Value ratios from 60% to 75%. Debt investors usually receive interest payments quarterly, depending on the project.[3]

The equity product involves investors buying shares from the Special Purpose Vehicle (SPV), valued based on the underlying property project. When the property is sold and the investment period ends, equity investors get capital repayment and a share of the profits.

CapitalRise currently has 9 property development projects open for investments, which have estimated terms between 9 to 26 months. There's no auto-invest feature on the platform at present. Investors looking to sell their investments before the term ends, has access to the secondary market, via a Bulletin Board. The platform will charge 1.5% of the sale amount.[4]

CapitalRise Returns & Fees

Among the current investments available, CapitalRise offers an interest rate ranging from 9% to 11.25%. In case of delays in property development projects and the loans, CapitalRise offers investors accrued interest until they are fully repaid. The platform does not charge any transaction fees to investors.

On the other hand, fundraisers incur fees ranging from 7-13% for senior debt and mezzanine loans, 12% for preferred equity, and 18% for joint venture equity. Additional costs include 0.2% for property valuation and 0.1% for legal fees.[5]

CapitalRise Management

The company was founded by three individuals: Uma Rajah, a fintech pioneer, and Alex Michelin and Andrew Dunn, who are both co-founders of Finchatton, a luxury property design and development firm. Since 2001, Finchatton has developed over £2 billion worth of luxury property in prime central London and around the world.[6]

CapitalRise has raised funds through the equity crowdfunding platform Seedrs. At the latest round in July 2023 the company was valued at an outstanding £42,2m with the offering of £49.18 per share. In three separate rounds on Seedrs, CapitalRise successfully raised over £5.7 million from 1,148 investors.[7]

Special Considerations

Since launching in 2016 the platform has repaid more than £140m to investors. In October 2023 the platform reached the milestone of originating more than £300 million in loans, funding developments across London and the Home Counties to the value of £822m.[8]

In FY2022(ending 31st of July 2022), CapitalRise reached the milestone of over £100 million returned to investors without any investment losses or defaults since inception. The platform experienced an 89% growth in new loans and a 42% increase in funds paid out to investors. The live loan book increased by 48% by the end of FY22. Revenue figures were not disclosed.[9]

For three consecutive years, starting in 2021 and most recently in 2023, CapitalRise has been recognized as the Best Alternative Finance Provider by the British Bank Awards.[10]

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