Singapore-based crowdfunding platform CoAssets, which recently celebrated a landmark, with the success of its first local real estate project, is in talks with the Malaysian’s Securities Commission to extend its offerings there, its founder and chief executive, Getty Goh, said in an interaction. Australia-listed CoAssets did not make the cut when Malaysia recently announced that it had approved six equity based crowdfunding companies to launch services. “Our position was more on real estate crowdfunding, and they were probably looking at more in terms of equity crowdfunding in other areas, but we think that we have a case and through our lawyers, are starting discussions with the Malaysian Securities Commission,” Goh said.
CoAssets, which launched in July 2013, crowdfunds for residential and commercial properties in Asia, Australia, the UK and the US, and to date, projects on this portal, have returned more than S$200,000. As the number of mature crowdfunding projects increases, the company expects to achieve payouts and redemptions of more than S$700,000 this year.
Goh further said the firm’s recent Australia listing had more to do with ‘transparency’, and was aimed at increasing investors’ confidence in the equity crowd funding platform. “Our financial accounts are audited twice – in Singapore as well as in Australia, by two separate auditors. By subjecting ourselves to rigorous third party assessments, it demonstrates that we conduct our business with a high level of transparency,” he added. Edited Excerpts.
You recently announced that CoAssets had successfully crowdfunded the first local real estate project – Mountbatten Lights, a boutique cluster bungalow development – which raised S$500,000 from more than 40 crowdfunders. For a Singapore developer, raising S$500,000 is nothing, considering the size of even the smallest projects here. So, why should they use this platform?
He (Chia Quee Khee, a retired lawyer turned private developer) did not need the money. He wanted to use this platform to understand if it could be an alternative source of funding for his other projects. He actually has gotten a bank loan – only a small part is through crowdfunding – he is forward looking and is experimenting on whether this can be an alternative for his other projects, which can be in Singapore or overseas.We have lot of lot of developers coming in dipping their toes in the water, raising S$100k, S$200k, and just testing the market. The response to Mountbatten Lights was better than we expected, despite the returns for the project being comparatively lower, at 6%; overseas projects generally offer returns above 10%. The returns for local real estate projects such as Mountbatten Lights are generally lower, but projects are more secure, which investors recognise. The positive response demonstrates that we have investors who are looking for security, rather than high returns
But S$100k, S$200k is something a startup would raise – not what a real estate developer needs!
They are doing it to understand how it works so that if they come back to raise S$1-$2 million – at least they are confident that they are able to do it. For us, we have a vested interest to see that all these guys succeed. For investors, they also see it as a form as lead generation. Many of these developers also do projects outside Singapore. For investors too, this is an option – they can invest in these projects after evaluating the developer’s performance here.The platform provides developers, agents and home or land owners with an alternative source of funding for their properties, linking them to investors who are keen to co-develop projects and co-purchase units.
Take us through your journey so far. How did CoAssets come about?
I chanced upon this idea when I did some real estate development work in Thailand. I found that a lot of developers in Thailand were facing this problem. I realised that there was money to be made lending funds to developers who needed between S$1 million to S$5 million working capital. This space is too big for the small guys – and it is too small for the big developers, and it stuck me that there was a market, and you could make money lending money. The business model is very similar to private equity funds, but PE Is limited to accredited investors, and we wanted to open it up to the man on the street, and that is how CoAssets was born. My first real estate project was in Thailand as the land cost was low – there was a market for such projects whose total value was between between $2 million to $3 million. It was at Krabi in Thailand, and since it has a direct flight from Singapore, and I was thinking of building holiday homes there. We got some land there,and two years later the prices were up, and we actually made some money on the project.
When we set up CoAssets in 2011, we got Seh Huan Kiat on board as both a co-founder and chief technical officer. (Seh, who holds a doctoral degree from the Massachusetts Institute of Technology and a bachelors degree from Imperial College, London, was then with Intel Corp. in the US. Their interests converged over realty—Seh was also a real estate investor managing a multi-million-dollar investment portfolio.)
We got seed funding from Singapore’s Expara Ventures, an early stage VC, and also got an investment from Dr Jeffrey Chi, managing director of Vickers Venture Partners. (Chi, who is also currently chairman of the Singapore Venture Capital & Private Equity Association (SVCA), had invested in CoAssets in his personal capacity.)
But after that when we tried to raise additional capital to grow operations last year, we could not do so. Even though we had revenues to the tune of S$700,000 in its first year, we failed to get venture capital firms to invest in us. We wanted to raise a one million dollars, and met over 40 VCs. Crowdfunding is seen as being a very iffy space and not many were not comfortable with funding a company in this sector. We were left with no option, but try the crowdfunding route. We told ourselves that since we are in this space, the best testimony for our business would be to crowdfund our funding requirements. We got private investors on board – we raised S$1 million from about 30 investors earlier this year, at a valuation of S$13 million. We felt this justified our venture. We could have sold some property that we owned, and raised a S$1 million, but we then would not have been plugged into the startup community here. We recognize that we need a business that needs a lot of endorsement – crowdfunding our own business was the very endorsement we needed.
The in July this year, we listed on Australia’s junior market (NSX). By then, we had crowdfunded more than S$36 million for about 15 residential and commercial projects, with an average return of 6-17%. For listing, we did not raise any funds, and took the last transaction for valuation which is at S$13 million. We are positioning to move to the main exchange – ASX. I think reasonably that it would take between 12-24 months to move to ASX – and hopefully by then, our revenues would be between S$50 million to S$100 million, but at this point, it is too premature to speculate.
Why did you choose to list in Australia? Also, startups in this region are all headed to markets like Australia, HK and other markets to list. How can Singapore retain local companies and get them to list here?
The fact of the matter why we did not even bother trying to list in Singapore is that, we were advised that we really would not stand a chance here – both in terms of compliance and also costs. Cost is a huge thing for listing on the Singapore Exchange. The other issue of listing in Singapore is eligibility. If my market cap is $150 million, or more, then I would list here. These benchmarks are indicative of the exchange’s willingness to accept such companies. My next point is such companies – the likes of us – there are not much such companies on the Singapore exchange. Look at a company like iProperty – they are an internet business and doing very well, but again they too are listed in Australia and that says a lot. Some people say the issue is Singapore really is that retail investors do not understand internet companies – I don’t think that is case. The issue actually is the size of our investors’ base – that is the biggest handicap. Next problem, as Asians most of prefer to invest in real estate, and this works against the equity market.
The other reason why we choose Australia was that we did a competitive analysis and found that in the US and UK, you have very established players in the crowdfunding space. There were no such players in ASEAN and the natural thing for us to do was to target this region and be known as one of the biggest players here. But South East Asia alone is not enough – we wanted to co-opt Australia. We are therefore looking at 4 markets rights now. – Singapore, Malaysia, Indonesia and Australia. We have two directors in Australia, we have a representative office in Malaysia, but our last six months the focus was on the listing. Now that it is done, we are engaging the Securities Commission in Malaysia to operate there.
While Singapore has many players in the peer-to-peer lending space, I think our differentiating factor simply is that, would you an investor be more comfortable dealing with privately held companies where accounts are not transparent, or would you be prepared to deal with a company that is listed and above board. Our financial accounts are audited twice – in Singapore as well as in Australia, by two separate auditors. By subjecting ourselves to rigorous third party assessments, it demonstrates that we conduct our business with a high level of transparency.
Malaysia recently give permits to six equity crowdfunding companies – did you apply?
Yes, we did apply, and Malaysia had approved six players in this space, but not CoAssets. Hopefully, they will be open for seven, and given our track record and the traction that we have shown so far, and our activities so far, we hope they look favorably on us. We were among the applicants. Our position was more on real estate crowdfunding, and they were probably looking at more in terms of equity crowdfunding in other areas, but we think that we have a case and through our lawyers, are starting discussions with the Malaysian Securities Commission. We want to discuss with them on equity based crowd funding, but preferential shares, as opposed to common shares.
If I were an investor, should peer-to-peer lending be in my portfolio? In the current context, how important is property in one’s portfolio?
As an investor, it depends on whether you believe in what P2P can bring to the market. Do they believe that P2P can open up a segment, and do they believe the potential of this segment to serve the unbanked and the underbanked? Do they believe in fintech? The final barrier for any fintech company to cross, if they need to hit the billion dollar valuation mark, is how can they address the unbanked. Today, those who are buying and selling online – they have a bank account and they also have a credit card. Based on a World Bank report, more than 80% of people in this part of the world don’t have either. That is the holy grail for any fintech company . Then investors must look at whether the companies they are putting their money into, where these firms stand terms of fulfilling these conditions.
The importance of property in one’s portfolio depends on the one’s time horizon. Property done right, at a good value, is ultimately akin to having blue chip stocks. Lot of people are not buying as much blue chip stocks as they want simply because it is not easy to leverage this. Property gives you more flexibility, and you can leverage it better. Not everyone wants to buy a blue chip stock, but by and large and a lot of people are rational, they want some security, and property is able to give them that. It also depends on how you look at property. In this part of the world, people have long accepted that positive cash flow from property is not what we should be looking out for. Positive cash flow is a plus, but many accept that it won’t happen in the immediate future, and lot of them hold property for the long-term and can accept one or two poor years. But Singapore is very different or the exception, as rental income from property offers significant returns, unlike other countries, where land is abundant. Wherever there is more land, there are alternatives to high rentals. When you sell to Singaporeans, you tell them about rental income, but when you sell a property in Malaysia, they don’t see rental income from it as a major factor
In Indonesia, in addition to real estate based equity crowdfunding, you are also doing peer-to-peer lending. Is CoAssets trying to do too many things? What is your focus, and what is core to your business model – crowdfunding or P2P lending?
In Indonesia, we have begun doing P2P lending. In Malaysia, we want to do equity crowd funding. We are also working with Singapore based startup Club Ethis which may be the world’s first Shari’ah compliant crowdfunding platform. Our business model is that, we see crowd funding as two aspects – crowd & funding, deals & investors. We don’t see any conflict to be doing all these different things – we care about the crowd and the funding. There is no difference in P2P and equity based crowdfunding for the investor.
Currently, the minimum investment required or that must be committed by an investor is S$1000. We are working to lower this to as little as tens of dollars. If we can do that, it really opens a lot of avenues.
With regard to signing on investors, how do you go about it as Singapore laws don’t allow solicitation? How do you protect investors who sign up your platform?
Yes, we are aware that Singapore laws don’t allow solicitation, and it is because the the regulators are concerned about protecting the man on the street. The profile of our investors are different – they are off high net-worth individuals. Singapore does not allow equity crowdfunding. We see ourselves as just crowdfunding and we don’t see ourselves as equity or debt based crowdfunding simply because our platform can support both. For example, when we go with Malaysia, the idea is to comply with the local law. If we do equity crowdfunding in Malaysia, we will not do the same in Singapore – we are not here to reinterpret they law. We want to have a track record of running a good debt based crowdfunding platform in SG.
There is so much negative sentiment surrounding the Singapore property market. What is your take?
The cooling measures put forward by the Singapore government are working. Whether it is doing well or not, depends on what base you are looking at. If you are looking at it from a very high base, then prices have come down. After the global financial crisis, the property prices went up very highly. But now the man on the street has realised that the party days are over. In the past, many people wanted to do a quick flip – now it is not possible. It is this realization – that is both shocking and sobering to many people here. But all things considered, if you are looking at Singapore having 6.9 million in population in the future, then all the properties that are seen as being extra now will be essential.