Proplend Institutional P2P Lending September20151

For more information about investing, please call +44 (0)203 397 8290 or email us at [email protected]

Peer-to-Peer Investing Invest in real estate debt secured against UK commercial property

Retail Office Industrial


P2P Core Principals 1. Circumvents the traditional financial institutions

(banks) 2. Multiple investors lending to a single borrower (loan

syndication) 3. Direct Loan Agreements between Investor and

Borrower

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Peer to Peer (P2P) Loan Investment

P2P Introduction Recent market dislocations have led to the development of an alternative investment opportunity in commercial real estate debt that offers investors attractive returns with limited capital risk.

Unlike traditional property allocations, which invest in properties directly and rely on capital appreciation for a significant part of the return, investing in the form of commercial property debt provides funding for the refinancing of property purchased by other investors. Resulting in higher certainty of return and lower risk.

Due to its distinct benefits, peer to peer lending or loan based crowdfunding to individuals and SMEs has gained traction with both individual and institutional investors. This new asset class offers diversification and yield to otherwise income starved investors in the current long term low interest rate environment.

The benefit of peer to peer lending for commercial real estate debt is that each loan is supported by a 1st charge over an income producing commercial property.

Proplend offers investors the ability to earn reliable and attractive fixed income returns of between 5-12% p.a.* by lending directly to the owners of income producing commercial property with every loan being supported by a 1st legal charge over the property.

The practice of multiple individuals & institutions circumventing the traditional banking system and lending money directly to an unrelated borrower via an online platform is called Peer to Peer (P2P) Lending.

P2P Numbers 1.Started 10 years ago with Zopa, consumer loans 2.Since then 3.5 billion loans facilitated 3.700 m lent already in 2015, up 117% 4.2015 year end target of 3.5 billion 5.UK Government via British Business Bank lent 60m to SMEs 6.April 2014, P2P came under regulatory legislation of Financial Conduct Authority

*After fees but before bad debt and taxes

For more information about investing, please call +44 (0)203 397 8290 or email us at [email protected] 2

The Perfect Storm

Restricted Bank Liquidity (European securitisation, bn)

Low interest rates (average BoE Base Rate)

Decreasing consumer trust (banks are well run)

E-commerce adoption (% retail sales online)

2008 2012

-70% -95%

-80% +430%

710bn

240bn

8.6%

0.5%

1975-2008 2009-2015

1987 2012 2004 2014

91%

19% 2.3%

12%

Source: AFME, Bank of England, British Social Attitudes survey, Verdict

Favourable market conditions have created a perfect storm for the sector


Current Opportunity Lending for commercial property in the UK has traditionally been dominated by banks, which accounted for c90% of the market. Following the financial crisis, banks have increasingly withdrawn from commercial lending due to several factors:

Stricter capital requirements | Deleveraging of balance sheets | Higher funding costs As a result of this and other reductions in traditional sources of lending, there is a considerable funding gap for the estimated 200 billion of UK commercial property loans which will mature over the next 3-5 years. These loans will require refinancing.

This shortfall is even more acute in the sub 5m loan sector which, according to Savills in 2014, account for nearly 25% of the outstanding loans. There are fewer than 11 lenders who are actively willing to lend into this market. The effect of this funding shortfall is an increase in the premiums that property investors are prepared to pay for commercial property loans, which is an opportunity for cash rich income starved investors. By effectively crowd funding the commercial property loan requirement, borrowers gain access to funding otherwise not currently available and investors gain access to low risk fixed income producing opportunities.

3

Commercial Real Estate Debt

Commercial Real Estate Debt Commercial real estate debt is a long established asset class for institutional investors seeking a reliable and attractive source of income with limited capital risk. Recent developments in markets and regulations have made it a highly attractive opportunity for individual investors, family offices, institutional investors and pensions who can invest into the refinance of existing outstanding debt on a deal by deal basis.

Fixed income returns exceeding quality corporate bonds Better capital protection than equity and corporate bonds Lower volatility than equity and balanced property

A clear legal framework in the UK offers a low probability of default along with high recovery rates

Diversification away from traditional asset classes


Returns & Capital Protection

Returns The lack of lending sources, especially in the sub 5m sector, has increased the rates that borrowers are willing to pay for property loans.

Proplend understood that not every investor has the same return requirement or risk appetite.

In recognition of this, Proplend created the first Tranched P2P loan by splitting the whole loan into 3 Loan to Value (LTV) based tranches.

Each tranche offers investors a different fixed interest rate and risk profile

The combination of the three tranches gives the borrower a blended fixed borrowing rate

Investors can choose which tranche or combination of tranches to invest into and how much to invest

This allows investors who wish to limit their exposure to 50% of the properties value (i.e. Tranche A) to participate in every loan

In the example shown, the borrower is paying a blended rate of 6.5% pa and the investors are offered fixed income returns of 5.5%, 7,5% and 10% pa

The borrowers blended rate is agreed on a deal by deal basis The enhanced returns are attributed to the lack of available

lending, the granularity of the transactions and the part-illiquidity of the investments.

Capital Protection Senior loans are at the top of the capital structure and in the event of default, they are the first to be repaid from the resale value of the property.

The whole loan is supported by a 1st legal charge on the property as part of an overall security package which is agreed on a deal by deal basis

The priority between the three tranches is pre-agreed in the Proplend Members Agreement, to which all borrowers and investors must agree and adhere. Loan are limited to a maximum of 75% LTV

The maximum loan is restricted by an interest coverage ratio


Risks & Mitigating factors

Fall in property income Loan amounts and terms will be determined by the quality of the tenants and occupancy terms, with resulting income protection features such as

lower initial loan amounts and interest cover covenants Proplend retains 6 months worth of interest to cover vacancies or borrower default

Fall in property value Investors have a minimum cushion of a 25% in property value before investment principal will be impaired. Lower tranches offer an enhanced cushion Recent drops in property values of 30-40%, without a full recovery, make a further significant drop less likely Significant drops in value increase the percentage of income relative to value, this proves attractive for distressed asset managers

Lack of suitable investment opportunities Given the size of the outstanding funding gap, especially in the sub 5m loan sector and the lack of market participants, investors should be able to

benefit from current market conditions

Illiquidity Investors should expect that any loan they enter into will remain outstanding for the term of that loan The Proplend Loan Exchange offers a secondary market for investors who wish to sell a loan part prior to the end of the loan term. It cannot, however,

guarantee a buyer for the loan will be found or the price that a loan may sell for

Prepayment Loan terms will include prepayment protection in the form of penalties, these will be agreed on a loan by loan basis

Loan default In the case of a Loan default, Proplend Security Limited will commence recovery of the debt due under the Security documents


Loan Criteria

Loan size up to 5m Max 75% LTV

Ultimate loan will be dictated by ICR Terms 6 months to 5 years Interest only

Fixed rate interest Property Asset Classes:

- Retail - Office - Industrial - Leisure - Mixed Use - No Development sites

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Summary

Principal Commercial real estate debt is secured by the entire value of the property Income Compared to equity and corporate bonds, returns on commercial real estate debt are backed by specific cash flows which are known at the inception of the loan. In addition, for every loan Proplend retains from the gross loan amount a cash balance equivalent to six months worth of interest. This would be used to make good the investors in the event that the borrower misses a monthly payment. Diversification Commercial property debt offers diversification to investments in equity or more traditional fixed income investments. The platform allows investors to build a diversified loan investment portfolio across a number of different properties and asset classes, geographic locations, tranches and terms of investments either on a whole loan or part loan basis. Summary of Benefits Tailored solutions to invest in real estate debt focused on quality income

producing commercial properties Internal due diligence supported by third party valuers & solicitors Fixed income returns to investors paid monthly or quarterly Excellent correlation diversification for investors Invest in whole or part loans Invest on a deal by deal basis, not a blind fund structure Proplend fee structure aligned with Investor returns

P2P Debt compared to other asset classes


About Proplend

Team over 60 years of real estate finance experience Brian Bartaby |CEO and founder of Proplend In 2003 Brian founded Longcross Capital, a firm specialising in providing financial solutions for real estate investors and developers. He spent 12 years successfully structuring funding deals to meet his clients ever changing requirements, which ultimately led him to develop the Proplend platform. Prior to property finance he spent 13 years working in London, NY and HK managing FX and Options trading desks where he developed a solid understanding of risk.

Geoff Miller | Director Geoff is CEO of GLI finance, an AIM listed investor in over 16 different alternative finance platforms in the UK, Europe, Africa and the United States. He has spent twenty years in the UK financial services industry, as an analyst and as a fund manager, focused within the Non-Bank Financial Sector. Geoff brings a wealth of experience in the Fin Tech Industry. Richard Berkley | Borrower Relations Richard has spent 34 years specialising in the finance of property investment and development. After a grounding in Barclays Bank he was appointed a Director of Seymour Adelaide, part of the London & Manchester Insurance Group offering structured finance for the construction industry. In 1991, Richard formed his own consultancy, The Property Funding Agency Ltd which provides advice and funding solutions for property investors and developers. He has also lectured on the subject of commercial property finance to land management students and CPD Courses. Julie Pavlick | Underwriting and Credit Julie has spent 15 years specialising in commercial property finance both in the UK and the US. Since 2008 she worked for Bank of Ireland where she was Associate Director responsible for a 200m+ portfolio of commercial, residential and mixed use property, her duties included financial analysis, preparing credit papers, monitoring systems and workouts. Prior to this she spent 4 years in commercial property finance in the US for 2 national banks. She completed her MBA in Finance in 2007.

Ben Butterworth | Lender Relations Ben is a financial sales professional with over 10 years experience in both financial and the property markets. He spent 6 years at IG Index culminating as Retail Sales Manager. Over the next 3 years he was Head of HNW & Corporate sales for Avondo Markets and AFX Capital Markets before switching to property in 2013 where he was Business Development Manager for Consulco Finance, a privately funded principal bridging lender.

Ashlee Utterback | Marketing Ashlee has over 12 years experience as a marketing and business development professional in the UK and Canada. As a qualified chartered marketer (CIM) she has developed and managed global marketing, PR and investor relations programmes within the FinTech, Mining, Media and Real Estate sectors. For the past 5 years she has worked with start-ups and SMEs establishing and executing strategic business plans. Previously she was a television sales executive, Vice President of a Canadian marketing firm and co-founder of a social media agency.

Proplend Timeline - January 2014 concept born & completed first loans without Platform - April 2014 GLI Finance (Institutional investor) equity investment - October 2014 Platform goes live - April 2015 Secondary platform goes live

Loan book status (2/9/2015)

Loan Book Statistics (2/9/2015) Value of loans reviewed 80,000,000

Value of property funded 4,831,800

Money Invested 2,935,500

Average LTV 61.2%

Loans Pending 8,600,000

Average Investor Return * 7.3%

AIR Tranche C* 10.5%

AIR Tranche B* 8.19%

AIR Tranche A* 6.96%

* Before fees, bad debt & taxes

Loan Book Active Good Standing

Late Payments Nil

Loan Defaults Nil

Losses incurred by investors

Nil


Structure

Proplend Security Limited (PSL) (Security Trustee)

Proplend Ltd (PL)

(Pla:orm)

Borrower Investor Direct loan contracts

Security between PSL & Borrower

1. Proplend Members Agreement; Tri-party agreement between PL & PSL & Borrower or Investor 2. Direct loan contracts between Borrower & Investor (if 30 investors then 30 loan contracts) 3. Security between PSL & Borrower; PSL enters into Security Documents as a deed and holds the Security in trust on behalf of the group of

Investors

1st legal charge over the property Company Debenture and / or a Personal Guarantee

Proplend Members Agreement


Contact

If you are interested in earning secured P2P Loan Income of 5-10% pa, please apply at our website www.proplend.com. Registration does not commit you to Lend on any transactions. Contact Details: Brian Bartaby Founder & CEO [email protected] Ben Butterworth Lender Relations [email protected] Office +44 (0) 203 327 8290

Proplend Ltd is authorised and regulated by the Financial Conduct Authority, and entered on the Financial Services Register under firm registration number 662661. Proplend Ltd registered office is 145-157 St John St, London, EC1V 4PW (Company Number: 08315922). Copyright Proplend 2014-2015. All rights reserved.

Proplend does not offer advice or make recommendations. Proplend is authorised and regulated by the Financial Conduct Authority (FCA) no 662661. All Peer to Peer lending platforms fall outside the scope of the Financial Services Compensation Scheme (FSCS). Interest you earn is subject to income tax in exactly the same way as normal savings. Interest is paid by Proplend on a Gross Basis. If you are in any doubt as to whether lending via the Proplend platform is suitable for you, you should seek independent advice from a financial adviser or other professional. Your capital is at risk.