In case you missed, here we bring you Yann’s recent interview with Laurence Samuels from Financialthing:
I visited the offices of Blend Network in 2018. CEO Yann Murciano and his team take a conservative investing approach, targeting property-based investment opportunities in different parts of the UK. Yann explained how Blend Network identifies investments that some other companies overlook. After the visit, I concluded Yann and his Blend Network team are a smart bunch. I haven’t invested through Blend Network (yet), but I was interested in finding out more about their operations and the products they offer. So, what better than a question and answer session with Blend Network’s CEO to learn. So, without further chit chat, enjoy.
Q: When was Blend Network launched?
A: Blend Network listed its first loans in August 2017 to test the platform with friend’s and family’s money and officially launched in January 2018. Since then, we have lent £5.8m across 22 loans with 0 defaults.
Q: Is Blend Network FCA regulated?
A: Blend Network is currently an Appointed Representative of Resolution Compliance Limited. We are in the process of applying for direct regulation.
Q: Who can invest through Blend Network? What are the requirements?
A: Everyone, including private individuals or companies (except US tax payers), can register on the platform at www.blendnetwork.com. It takes just a few seconds to do so. Once registered, we perform KYC (Know Your Client) and AML (Anti Money Laundering) checks.
Q: Does Blend Network offer an IFISA?
A: At present, we don’t offer IFISA. We do, however, offer investments through SIPP and SSAS.
Q: Blend Network offers investors the opportunity to buy shares in individual properties and investment property loans? Can you explain the difference between the two investment types?
A: Blend Network offers only debt, not equity. That means investors are lending at a fixed rate for a fixed period to the property development project of their choice from all the ones available on our platform. Investors can lend any amount they want from a minimum of £1,000 and earn between 8-15% p.a. on their investment. Investors pick and choose the project they want to invest in.
Q: How are the investments secured?
A: Blend Network loans are always secured against first-charge on the underlying property asset. This ensures that in case the borrower defaults, we can step in to try and recover investor’s money. Furthermore, our average Loan-To-Value (LTV) so far is 56%. This ensures that if we have to liquidate the assets at a discount, we have a buffer to recover investor’s money.
Q: How much approximate interest can investors expect to earn?
A: Investors on Blend Network can expect to earn between 8-15% p.a. on our property-secured loans. So far, our average return to investors is 11.86% p.a. with 0 default. Investors pay no fees when they lend through Blend Network. What you see is what you get.
Q: What are the minimum investment amounts for property shares and loans?
A: The minimum investment is £1,000 per loan, although we do recommend that investors spread their investment across at least 10 loans. We do not offer shares.
Q: Do you have an auto-invest product for people who don’t have time to pick their own investments? If so, can you explain how this product works?
A: Yes, we offer an ‘AutoLend’ feature. This feature allows investors to select their criteria such as desired interest rate, desired length of the investment and desired investment amount. Then, the ‘robot’ will then lend automatically once a new loan that fits those criteria.
Q: Can you explain how Blend Network sources its property deals?
A: We work closely with a group of introducers, and directly with some borrowers. We are developing relationships with the property developers as we like the ‘repeat’ business.
Q: What steps does Blend Network take to prevent borrower fraud?
A: An enhanced due diligence process, as well as KYC (Know Your Client) and AML (Anti Money Laundering) checks. We also use experienced Solicitors and always meet the borrower.
Q: So, risk can be evaluated, how large are the spreads between investor returns and borrower loan interest rates?
A: We use a 2% spread between what the borrower pays and what the lenders receive. The interest you see on the platform is the interest you get.
Q: Does Blend Network offer a secondary market to exit investments?
A: Yes, Blend Network does operate a secondary market. Lenders who wish to sell their loan parts before maturity may use the secondary market to list their loans for sale for a 0.6% fee on success. There is no fee when lenders lend in the primary market.
Q: Is there a fee to exit? What other fees do investors pay?
A: Investors pay no fees to lend on the loans. What you see is what you get. Investors will only have to pay 0.6% if they sell a loan part in the secondary market.
Q: What procedures are in place Blend Network do to ensure property valuations and development costs are accurate?
A: At Blend Network, we have an experienced in-house property lending team who performs enhanced due diligence that includes a comparable analysis in every case. We then complement our own in-house due diligence with an independent RICS valuation report. We work closely with independent Quantity Surveyors throughout the process.
Q: How are Blend Network investors protected against any legal action brought on by loan borrowers?
A: Lenders on Blend Network lend directly to the borrowers as a syndicate of lenders. The Security Trustee is appointed to act on behalf of lenders. More information on this can be found in our Terms and Conditions.
Q: Can you explain what would happen and how investors records are kept and secured in the event Blend Network ceased to trade?
A: All client money is kept in a segregated client account (we use Barclays). We operate 1 back up every day. In the event Blend Network would cease to trade, we do have a Living Will contract in place that will ensure the platform keeps operating until all loans are repaid.
A: We officially launched in January 2018. We are a very much profit-focus business as opposed to focusing on crunching deals. We expect to be profitable in 2020.
Q: How are Blend Network’s operation funded?
A: In December 2018, we announced the closure our equity round which was backed by some very high-profile private investors including the co-founder of £40bn macro hedge fund Brevan Howard, Jean Philippe Blochet, former Vice Chairman of Barclays and current Chairman of OakNorth Bank and Citigroup Global Markets Ltd, Cyrus Ardalan, as well as former CEO and current Chairman of Publicis Group, Maurice Levy. Those are not only equity shareholders in Blend Network, they are also lenders on our loans.
A: We have a strong team with a proven track record in banking and property. Me myself I headed up Morgan Stanley’s metals trading desk for a decade trading a multimillion book. Roxana Mohammadian-Molina headed up the metals strategy team at Morgan Stanley and later on founded a successful online mobile beauty platform connecting customers and beauty professionals. Paul Watson joined us as Head of Origination in January from Octopus where he was a senior originator on the development finance team. Charles Lamplugh, the chairman of our Credit Committee, worked for 35 years with Lloyds Bank, spending the last 25 years in SME and Corporate Banking. All in all, we believe we have a well-rounded and strong team with solid experience in the sector. Following our equity raise, we are now expanding our origination and underwriting team so we can offer more deals on the platform. But what is perhaps most important is the name and calibre of our equity shareholders, all of whom are extremely successful in their own businesses and believe in what we are doing at Blend Network.
Stay tuned and keep an eye on www.blendnetwork.com for more deals coming very soon.