Putting a spin on real estate investment for Singapore investors | An Interview with CoAssets, Getty Goh
In the short span of five years, CoAssets grew from a two man startup to a $50 million real estate crowdfunding company with a regional footprint and a 60 strong team. In fact, it was the first publicly listed crowdfunding company in Southeast Asia, when it floated its shares on the Australian Securities Exchange in 2015. At present, other than crowdfunding, CoAssets offers Financial Technology services to brick-and-mortar Finance companies.
ZUU online caught up with CoAssets cofounder and CEO, Getty Goh, to find out how it all started and what led to the company’s dramatic transformation.
A Real Estate Man
To understand CoAssets, it is essential to know the man behind the business.
Goh explained to ZUU online that he had been working as a regular in the army, when he decided he was going to be an entrepreneur once he had served his bond. “If I wanted to work for a big organization, I could just stay on with the military. Instead, I knew I wanted to cut my teeth to be an entrepreneur and do my own business.”
At the time, with his training in building and real estate, Goh had already been dabbling in property investment, starting with a $600,000 1-bedroom apartment at Robertson Quay that he purchased in 2002. When the SARS outbreak took a toll on his property valuations, he became acutely aware of the difficulties investors faced when investing in an illiquid asset like property.
Naturally, his first venture after leaving the army was also in the business of real estate. Goh set up a boutique real estate consultancy firm in 2008, called Ascendant Assets, to help other property investors navigate their investment. He also set up a boutique real estate development company in 2011 – Migo Development – to build high end residential homes and resort developments in Thailand.
Meeting a gap
Incidentally, the idea for CoAssets arose from Goh’s experience at Ascendant Assets and Migo. Goh noticed that corporations looking to borrow between $100,000 to $5 million often had few options for raising funds. “Banks don’t really serve this space for several reasons, one of which is that SMEs generally have a higher rate of non-performance. For every 10 SMEs, 8 to 9 of them don’t survive the first 5 years,” he explains.
“Another reason could be because the level of due diligence the banks have to do on a SME trying to loan $1 million to $5 million, is the same as a company looking to loan $100 to $200 million. From that perspective, banks might say it is more worthwhile of their time to service the bigger loan guys.”
The issues didn’t just lie with the borrowers either.
Goh realized that there were a lot of Singapore investors holding between $100,000 to $200,000 in cash that they were looking to invest, but their preferred option of property investment was unattainable with the imposition of the total debt servicing ratio (TDSR).
“These guys do not want to put their money into a savings account that gives them less than 1%, or a fixed deposit that gives them 1%-2%, so as a result in the last couple of years, we have seen a boom in the alternative investment space. Unfortunately, many of these, tend to over promise and under deliver.”
“Asians, and Singaporeans especially, are very interested in investing in real estate. It’s symptomatic of their preference for investment products that are deemed safe, and that can give them high yield,” said Goh.
To that end, Goh and his business partner Dr Seh Huan Kiat, a PHD holder from the Massachusetts Institute of Technology (MIT), created CoAssets in 2013. The real estate focused crowdfunding platform was designed to match the funding needs for the smaller property developers and the investment needs of the investors.
Mistaken for a scam
Their timing could not have been worse.
The establishment of CoAssets came at a time when overseas real estate investment had been marred by a series of investor scams, including Profitable Plots which allegedly helped investors to invest in land in the United Kingdom, and later on, EcoHouse which allegedly developed social housing in Britain.
Goh and Seh had to work very hard to remove that stigma and assure investors that they were running a legitimate business. By nature of a crowdfunding platform, investors lend directly to the companies. “If anything happens, we will perform the role as an administrator to liquidate and recover whatever assets the companies have for the investors,” he explained. “At the same time, when we put up a company for funding, we try to ensure that they’ve got some amount of assets, such that if we needed to pursue legal action, we would be able to get some money back.”
That was also one of the reasons Goh pushed for the company to be listed on the ASX in 2016 and obtained its Capital Markets Services Licence (CMSL) from the Monetary Authority of Singapore (MAS) in June 2017.
Now the business has a 2-pronged lending approach. It continues to run its crowdfunding platforms in Singapore and China, respectively through the MAS-licensed CoAssets Pte Ltd and its joint venture company CoAssets China. At the same time, it also operates as a corporate lender through CoAssets International, which has proven to be very popular among corporate companies.
“As a business, if I raise funds via crowdfunding, there’s no guarantee I will get funded, because it’s an open market. And the time it takes is not within my control. Sometimes it can take 1 month, sometimes it can take 2 weeks,” he said. “Whereas if they borrow directly from CoAssets International, they will know that once they pass our due diligence, they can actually get the funds. The difference is they must pay higher returns.”
While our corporate lending service may cannibalize some of our crowdfunding business, from the business perspective, this is really a complimentary service, because now it gives them more funding choice.”
The moves proved effective for CoAssets. The corporate lending business has issued more than $16.21 million worth of loans since the listing, with $6.65 million done within the latest half year period.
The Singapore crowdfunding business did a record $5.11 million worth of deals in the half year period after it received its CMSL, despite applying a more stringent assessment on its borrowers, known as the CoAssets Risk Assessment Model (CRAM), and only accepting 14.29% of the companies who approached it for funding. At the same time, CoAssets China funded over RMB28.15 million worth of crowdfunding deals.
On a group level, CoAssets reported $2.04 million in earnings, on a topline of $2.55 million revenue for the half year to Dec 2017, due in part to investment gains. The group’s overall write off rate was 1.98%. To date, the group has over 550,000 registered investors on its platform, with about 55,000 of them from Singapore alone.
Crowdfunding is not a sure-win investment
While the business has performed well for investors on its crowdfunding platform, Goh is still careful to educate them that all investments will have their element of risk.
“A misconception they have is that crowdfunding is a sure-win investment. Investors sometimes don’t appreciate that when you are doing deals with 12% to 20% returns, the risk of losing your money is very different from putting your money in a bank account.”
“Over time, our investors have gotten savvier, and they’ve also been able to see our track record. Being in the market for 5 years, we’ve started to see our investors recognizing our staying power and recognizing that we have been doing things right, because quite a lot of our investors are repeat investors,” Goh tells ZUU online.
“And I think that’s really how, slowly, the confidence level is growing.”
To be sure, Goh has much greater aspirations for CoAssets to become a regional virtual bank. “We see ourselves in the fintech space, and that’s always the aspiration for a lot of fintech companies,” he said. “But I hesitate to say it because I think running a virtual bank is a very big endeavor. But we will use technology as an enabler as we continue to provide online services that the market needs.”
In line with that vision, CoAssets has invested in financial technology companies such as Fintech Pte Ltd (A Hong Kong based online cash management platform) for corporates and their associates and Brighten Finance Limited, a licensed moneylender in Hong Kong. In January 2017, CoAssets made a RMB 1 million strategic investment in Fujian’s Da Xian Bing Internet Technology Ltd (“Da Xian Bing”) for a 10 per cent equity interest.
The company is also working on integrating blockchain into their platform and building an e-wallet system into its overseas platforms, under the watchful eye of Seh, CoAssets’ CTO, supported by CoAssets’ 20-strong technology and programming team.
So what advice does Goh give to investors?
“I strongly encourage them to diversify, because you don’t want to put all your eggs in one basket. Take your time to learn about the different types of investments before you pull the trigger and when you actually do invest, spread your investments out.” he said thoughtfully.