We’ve long been pitched the virtues and ROI available in the renter and traditional bricks-and-mortar spaces alike. Proptech is burgeoning with options for the eager property-savvy investor looking to take advantage of the latest house-hunter or seller app. But what about the higher-yield returns that alternative and larger scale land deals and builds bring. Can this quagmire of startups and credentialed operators be policed and helpfully networked in a way that makes the returns lucrative enough for the historically risk adverse?
Alex Harrington-Griffin believes so. Alex secured his first commercial win in the tech space in 2011, a b2b group buying platform, which he ‘flipped’ within 12 months, selling out to the largest competitor in the market. “We took a 24K startup and pitched it against the largest player in the market worth I estimate around 500K”. We were much smaller then but so much more nimble they acquired us within less than a year of operation.”
Harrington-Griffin’s latest endeavour is even more commercially audacious but not when you realise the significant need for it in the market.
I thought I was alone in the frustrations that we were feeling when we were getting outbid by developers and buyers who maybe had less than sincere intentions. Over time we started to get to know their MO and we were hearing similar stories by meeting landowners and hearing who they had dealt with.
What makes this industry very difficult is that very often, those who have less than sincere intentions will say one thing and then end up completing on something entirely different, which makes it a very difficult model to compete with if that doesn’t sit right with your personal business ethics which it doesn’t for me. The idea of lying to a 74-year-old man that has worked in an MOT garage for the last 25 years, and spent blood sweat and tears to keep it afloat, then being screwed out of his pension is not something I could do and then sleep at night. But there are plenty of people that we have unfortunately met that can and have got away with it.
So what does the average nefarious property deal look like in your experience of coming up against rogue operators?
We kept on finding opportunities with great landowners who were keen to move out or move on or retire and release some value in their assets and they were getting sold fantastic stories by these very cloak and dagger developers. They would ultimately offer them more than us, meaning we no matter how much we explained our background and how transparent we were, they liked the idea of an extra half – one million pounds. Low and behold a year later that deal still wouldn’t be done. Or, it would get done at a much lower figure than we ever put forward because they had been able to play on the emotional ties of the landowner seeing that cheque arrive and spending the money in their head. Once a landowner is so far down the line they don’t want to start the whole process again and two years later still be working winters in an MOT garage so that was the frustration we were having.
To fully understand the scale of the issue at hand, Harrington-Griffin convened a developers roundtable to discuss the key issues that were affecting them.
For 18 months we have been running a developers boardroom group that meets once a month and as that has developed we realised that we were not alone in our frustrations with this process. Good quality developers who had genuine business ethics along with the capability and funding were getting screwed over by inexperienced developers because the market is enticing and there are very few barriers to entry. Seasoned developers were losing deals to people who would talk great numbers but couldn’t back them up or they were up against the cowboys who were able to put down fantastic offers and say the right things to get the deal agreed to get rid of everyone else and then play the system for 6-12 months. They would end up paying a lot less than everyone else.
We hear it time and time again. “Well we’ve found this in the plan, the markets changed, there are financing issues”, they had no intention of paying their starting offer but that is their strategy to get everyone out of the bidding. Try and look these people up on paper or online, they don’t exist for that very reason. Land development is a lot like the Wild West, anyone can wake up tomorrow and call themselves a developer. But the landowner who has never done this before and often their distrust of agents, means that they end up entertaining conversations directly from developers. They end up getting screwed over by them because they just don’t know the questions to ask and see a good one from a bad one or established one from a startup.
Surely there is some form of regulation process or reputation based app that gives buyers, sellers and developers a basic grounding somehow?
There is nothing, no FCA regulation, no dedicated body. Estate Agents, Architects, planners, surveyors have a myriad of respectable approval systems. They’ve regulatory bodies that offer them some opportunity to say, well what have you done beforehand, whats your qualifications, ok great, we’ll give you our RICS approval or our RIBA approval so you can put that on your website, on your business card, your front door. There is nothing at all if you are a property developer. Say you’ve been doing it for 50 years, completed over 500 projects and funded every single one through banks and investors and are extremely capable. Well, there is no way for you to prove that other than writing it on marketing material or explaining it to people on a case per case basis. We didn’t realise it was so massive, we only found this out from our research.
When we met the Mayor of London and explained what the platform did, he said “great I want you to come and talk to the housing team”. So we’re invited into city hall and met with James Murray, the Deputy Mayor for Housing and Residential Development and the team at the GLA. We explained our model and how we vet the buyers beforehand and they were very encouraged, but confirmed our thoughts that one of the challenges of selling land is that there are no real accepted or widespread means of confirming developer ability. Whilst some builders are fantastic at building a conservatory or knocking a kitchen through to create an open-plan space or a loft conversion, these are not developers. We know that because of our independent study of developers only 6% were part of an organisation or body. No one regulates this space.
So what is TrustedLand and how is it going to legitimise the market?
Our platform helps to give those who have the credibility and capability, some kudos and independent proof of what they’ve worked on. It informs landowners to make sure they ask the right questions, so they know what to expect and they know what is realistic and how to get the best deal. We want them to be able to move on to their next phase in the safest and enjoyable way and help good quality developers grow their brands working on good quality deals.
The link between buyers and sellers is a question of matching them when they both have a very different understanding and needs of what each wants. That is what we are doing here, we’re taking two very different business people putting them together and making sure they can respect and understand what each party wants from the deal.
The market space is crazy at the moment. We’re in an incredibly exciting position to go and take it on.
What does the process of checking these organisations and individuals look like?
Our first focus county was Hertfordshire, it was our first ecosystem to get the balance of agents, landowners and developers right. The model includes professionals like architects and planners later down the line. Our process is seven rounds of screening, it’s everything from financial history and capability to track record on how previous sites have been acquired, added value and then sold. Everything down to the directors’ previous history, so comparing Companies House details to credit files on each of the senior decision makers, it’s quite robust. It’s there to say anyone who is a legitimate and established developer who has done a few projects beforehand and proven their ability will be able to pass. What it makes it harder for, is those who have been very cloak and dagger, under the radar operators who are not so willing to grow a brand and be in the public space so people can check them out. Landowners just don’t do these basic checks, had they done some, they might have discovered things that would have brought to light details about some of the people they were working with. It’s a system of base and then background checks to bring out information that we feel you should know about someone that’s going to be controlling your retirement if it’s tied to land. That process is robust. We take agents through a similar program. Everyone has to receive recommendations from people they’ve made transactions within the past. So if you pass all the screening you then have to gain recommendations from landowners or from parties controlling the sale to show everything in your trading history was above board. Our ethos is to champion the best in the market. We don’t focus on the regulatory control though, it is about prevention.
Tell us about some of TrustedLand’s core team?
Maud Rousseau was at Rightmove, moved to Zoopla, grew them to the second biggest player in the market before helping sell for £2.2 billion. She was there from day one and she has incredible insight into how these platforms have gained their initial traction, how they connected the consumer looking for properties and opportunities and the sellers. She’s given us great insight into the early stages but also how you stagger that growth to the point of getting to critical mass. Also when to realise that it is time to stick in the serious investment in and remove barriers to you being the go-to leader in the field. That is exactly what we are working toward as our strategy. Having that larger company mindset and someone who has gone through very very quick growth and through several investment rounds gives us a lot of confidence that our strategy is applicable here.
Margaret Longden is someone who I was aware of. We had met at a few times in the property development scene and as Countrywide started to get into their curious period of market focus, Margaret realised she had a lot of input especially in the digital space and wanted to go and get involved in a few startups at the early stages. She decided to leave Countrywide as one of their regional MDs where she was also leading a sizeable investment into digital platforms. It was just great timing. She said that she had seen a number of proposals that had been brought to her and this, she tells me, was the first that she felt was really covering a serious gap.
So as you enter your initial seeding round, what sort of investors are you seeking?
I have put the initial £90K in as a pre-seed which I think is only right and proper to show my commitment to the project. We want to bring in strategic investment for this Proptech solution. Anyone involved in the built environment is welcome to discuss the investment. Whether it be the origination of property deals, the build-out, the financing. The one thing that we have stressed and want to confidently draw peoples attention to, is that everything starts with land. Once you’ve agreed that piece of land and purchased it, you have to build and sell. Being at the forefront of that transaction chain means that we have the opportunity to get involved in the construction procurement, the financing of acquiring that site, the financing of developing that site, the warranties, insurance, the whole chain that follows on. We’re at the start of the conversation. The current model is built around land but there are a number of significant markets that we can add on to this later on and create this Zoopla effect of taking the parties through an end to end solution. Anyone involved in the built environment will understand where this can go.
