Brickfloor, a start-up that has developed a unique model for institutional investors seeking yield in the low interest rate environment, has secured $50 million in a capital raising round backed by ANZ Banking Group and Flight Centre co-founder Geoff Harris. The company guarantees sellers of residential property in Melbourne and Sydney that it will buy their homes at an agreed price if a seller is unable to find a better offer. The seller pays a fee of 2% of the price agreed to with Brickfloor, which is paid whether it is Brickfloor or another party that buys the property. The company has already made $50 million in offers to buy homes after five months of operation in Melbourne and two months in Sydney. The investment was made from ANZ’s new ANZi venture fund and is seen as a way of improving relationships with mortgage customers, although ANZ declined to comment on the investment. Brickfloor’s high-powered advisory board includes Matthew Quinn, former CEO of Stockland, and Saul Eslake, former chief economist of ANZ, among others.
Brickfloor is seeking to partner with agent groups to refer property sellers to its platform. The company offers existing homeowners the confidence to upsize before selling their current home, and it can be used as leverage to extract a higher offer from another bidder. Agents may be willing to refer sellers to the product to speed up listings. Currently, Brickfloor is available for homes valued between $350,000 and $2.5 million within 50 kilometers of Sydney and Melbourne’s CBDs. The company uses proprietary algorithms to determine the appropriate offer price based on local sales and other metrics.
Founder Dean Fraser said he aims to offer better returns than commercial real estate funds, which typically average between 5% and 6%, via a combination of the underwriting fee and rental yields. Capital appreciation will be in addition to that and is expected to surpass commercial property. The fund is targeting investors seeking diversification from equities or commercial property.
Fraser said the company would like to attract more super money into residential property, citing growing demand for alternative assets with a strong yield, especially in the low interest rate environment. Brickfloor has debt funding in place and is confident of raising additional capital as required. Offers will not be made to buy properties without sufficient capital to complete the purchases.
Additionally, 20% of the fund will be allocated to supporting affordable housing initiatives by offering tenants rental discounts. Geoff Harris, co-founder of Flight Centre, said he was not aware of the guarantee model being used to build a fund in any other market and was attracted to the company because it offers certainty in a stressful transaction for many people and will stockpile assets in Australia’s largest asset class. He added that the model is scalable overseas if it works in Australia.
