Investor Update for Property118 Portal Limited

Here’s a sneak peak into our new business plan which will impact  all UK buy-to-let landlords, not just regular Property118 readers and investors into Property118 Portal Limited. Please be sure to read the comments too.

We are looking to launch a new business model offering similar services to a Trade Union, albeit for buy-to-let landlords. 

If at all possible we would like this to be within the company shell of Property118 Portal Limited, a complete pivot away from the previous business model which is all but defunct due to current Government legislation affecting private housing providers.

You may have seen discussions on the Property118.com website and other forums including Facebook etc. about the prospects for creating a Property118 Landlords Association.

The business plan for that is now very well advanced and we intend to launch it alongside the Court of Appeal judgement hand down for the Property118 Action Group case against the West Bromwich Building Society, which is scheduled for 8^th June 2016. We are extremely confident!

You may be aware that I took on the above case in my own name and organised all legal representation personally. Over 300 Property118 members, who were also affected by the lenders questionable decisions, helped me to fund the case in return for being represented by the judgement. Over £500,000 was raised and Cotswold Barristers were appointed as our legal action team.

This hasn’t been the only case where the team at Innovative Landlord Solutions LLP (owners of the Property118.com website) have helped to fight injustice for landlords. We have also organised legal action against former directors of letting agencies who have closed their businesses down after fraudulently misappropriating funds by abusing their position to utilise using tenants deposit money and landlords’ rents to prop up their failing businesses, and often ludicrous personal salaries and bonuses to extract money from the company. We have another case going to Court this month and many others we have been involved in have been settled when the perpetrators of the crimes have realised that the Limited Liability status of their former company does not protect them personally from criminal prosecution.

We thought long and hard about the name for the new business model and eventually decided against calling it Property118 Landlords Association. This is because the services we will provide to members will be very different and non-competing with other landlords associations. Our position in the market will be to fight for the rights of buy-to-let landlords and to back that with legal action where necessary. Accordingly, the business will be branded Property118 Action Group.

We have valued the intellectual property associated with our experience and the new business model at £6 million. We will be seeking to raise working capital through equity investment of a further two million pounds

If we are able to develop the new business model of Property118 Action Group within the company shell of Property118 Portal Limited then our Seedrs investors will see a significant uplift on their existing notional share values overnight. This is based on the valuation of the original Property118 Portal model of £1.5 million vs the Property118 Action Group model valued at £6 million.

So what is the business model?

Small UK private housing providers (buy-to-let landlords) often lack the necessary experience and funds to defend their rights when attacked through legislation or suffer losses at the hands of rogue business operators. Property118 Action Group membership will offer them a unique and powerful umbrella at a very reasonable price.

There are around two million buy-to-let landlords in the UK.

Membership fees at just £10 a month will provide members with peace of mind, in that Property118 Action Group will assist to protect their rights under the following circumstances:-.

1) Organising Private Prosecutions of rogue letting agents and other service providers

2) Organising representative action against unfair manipulation of terms by mortgage lenders

3) Organising Judicial Reviews of adverse legislation

Potential exit strategies for investors will continue to be trade sale, flotation, acquisition by an investment group or share buy back from investors after a minimum of 5 years of trading.

Our first objective is to recruit at least 50,000 paying members within 5 years, representing around 2.5% of the target market. This would produce £6 million a year of revenue based on monthly membership fees of £10 a month from each member.

65% of all share capital raised, together with a similar percentage of ongoing membership fees, will be reserved to fund future legal action campaigns on behalf of Property118 Action Group members.

Assuming 33% retained earnings from membership fees alone, and the membership target of 50,000 paying members being recruited, shareholders funds would grow by ** at least £2 million per annum **.

** Where litigation based legal action proves successful the costs are generally awarded to the winner. In the case of private criminal prosecutions The Crown picks up legal costs once Magistrates agree that a trial is in the interests of the public, regardless of whether the accused is found innocent or guilty. In both of these scenario’s the funds utilised to fund legal action would be returned to build financial reserves. **

We may not always be in a position to fund all legal battles, regardless of their likelihood of success, but if/when we are short of money we are in a strong position to provide guidance to our members on fund-raising for their own cases, e.g. sharing costs with other members, insurance backed litigation etc. We have already proven that we are successful in this regard.

Use of proceeds

To provide working capital to fund our core PR based marketing strategy, based on assisting our members to defend their rights. Successful legal cases will enhance our public profile and encourage landlords to seek the security and peace of mind that only Property118 Action Group membership can provide. Small landlords usually lack the power to defend their legal rights. Property118 Action Group Limited offers them a unique and powerful umbrella at a very reasonable price.

To raise awareness of legal and legislative issues affecting UK landlords and legal action brought on behalf of members.

The minimum required level of funding required is £80,000 although we hope to eventually raise up to two million pounds for up to a 25% stake in the company.

Reaching the market

Successfully defending our members rights will enhance our public profile through media based PR and reporting.

ARLA (Association of Residential Letting Agents) have already agreed to promote Property118 Action Group at their landlord exhibitions and to hand out leaflets to attendees.

We envisage spikes in new membership when groups of landlords feel they are being attacked. For example; in 2013 Bank of Ireland raised tracker rate mortgage margins and over 13,000 borrowers were affected. Many of them initially expressed an interest in legal action. However, when it came to having to commit substantial sums of money to fund legal action their enthusiasm quickly dissipated leaving less than a few dozen of the more militant campaigners with the impossible task of raising the required funds. Counsel’s opinion of the case was very optimistic. If each of those affected had only needed to commit to paying £10 a month the position might have been very different, as would the level of media attention on the case as it progressed through the judicial process. The Bank of Ireland case is likely to be one of the first we will seek to fund on behalf of our members, providing a sufficient number of affected borrowers become members of Property118 Action Group of course.

There are also many examples of landlords having been victims of fraud by abuse of position committed by their letting agent where Police and CPS have dropped cases due to lack of resource.

Competition Strategy

We do not envisage any realistic competition on the basis that no other organisation has the same level of experience, success and intellectual property to operate a similar business model.

Many Landlord Associations and professional bodies in the letting industry sector have encouraged the establishment of a membership based Property118 Action Group on the basis we will be non-competing and providing a service which they are unable to offer to their members themselves.

Possible hurdles

Seedrs are yet to be convinced that a pivot away from the original business model of Property118 Portal will not invalidate SEIS tax relief. Our Hon. Legal Counsel, Mark Smith (Barrister-at-Law) Head of Chambers at Cotswold Barristers, disagrees with them.

If Seedrs block the new fund-raising we will have no alternative but to form a new company and to use another crowd-funding provider to raise the working capital for the new business model. That would result in investors in Property118 Portal deriving no benefit from it.

That is the last thing we would want!

Our credibility also hangs in the balance pending judgement from the Court of Appeal in respect of our representitive action case against West Brom of course.

We ask all shareholders in Property118 Portal Limited to let their thoughts be known on this matter to Seedrs. Please email Kirsty Grant kirsty.grant@seedrs.com and cc to mark@property118.com

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