The DDF (Downing Development Finance) Property Bond will offer investors fixed term, fixed returns and a degree of diversification across a range of property developments.
The proceeds of the new bond will be used to fund a range of residential property developments and support small business owners who want to develop their premises, such as pubs and care homes.
As part of the bond launch, the investment platform has recruited private equity professionals from Funding Circle to help develop Downing’s expertise in residential property.
Hannah Kenny and Parik Chandra both previously worked together in the real estate finance division for Funding Circle.
Downing will also apply its own due diligence process to carefully select a number of loans from Funding Circle’s own closed property loan book, which will be included in the DDF portfolio.
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“We believe the new DDF Property Bond can offer investors something really unique in the popular world of property investing,” said Julia Groves, partner and head of crowdfunding at Downing (pictured above).
“Unlike some other platforms that offer this type of property lending, we offer fixed rather than target rates, so investors know what returns to expect.
“The fixed term of the bond also means investors know when they should get their capital back.”
The bond will offer a choice of two fixed rates, either paying 5% pa for investors who hold the bond for one year, or 6% pa for two years.
Investors also have the chance to earn higher net returns by receiving interest tax free on the DDF Property Bond through the Downing Innovative Finance Isa wrapper.
The annual fees charged by Downing will be capped at 2% pa, which aims to keep the cost of finance down for the borrower and maximise returns for investors.
“We believe we are launching the new bond at an interesting time in the broader property market – with increasing restrictions on buy-to-let, some property investors are looking elsewhere for the competitive, risk-adjusted returns offered by the DDF Property Bond,” added Julia.
“The bond can also help address the lack of financing for small- to medium-sized property developers, which is a contributing factor to the ongoing housing shortage in the UK.”
A summary of the loan book will be published online and show the rate of interest that the borrower is paying.
Parik added that it is focused on helping developers who have good track records and know their areas.
“Crucially, we are not volume driven and favour quality over quantity when we make lending decisions.
“We hold direct relationships with a number of developers who we have worked with and funded on multiple schemes, and operate with a close network of intermediaries who have consistently provided us with quality deal flow.”