Some kids dream of becoming an airline pilot or Formula One driver when they grow up, but Joël Duysan, CEO of Beebonds, said “my dream when I was a little boy was to be a stockbroker.” And that is exactly what he did after university. “I was very lucky to work on the floor of the Brussels stock exchange.” After the bourse switched from an open outcry system to electronic trading, Duysan shifted to investment funds and wealth management.
In the wake of the 2008 subprime crisis, “the challenge was to find a financial product which was good for the planet, good for clients, good for society, and not only good for fund management commissions,” he told Delano during an interview. “I didn’t find it, so I had to create it.” As luck would have it, Belgium had just passed a new law permitting crowdlending platforms, “so we created Beebonds”.
Beebonds matches retail and institutional investors with real estate and corporate project borrowers, who issue tradable mezzanine debt that pays annual gross yields of 6% to 9%. It has facilitated roughly €44m in lending over 44 crowdfunding campaigns. About 10% of total lending has been to projects in Luxembourg, according to Duysan.
Property projects
Borrowers can seek sums between €500,000 and €5m. Beebonds started with financing real estate developers, looking to backfill bank credit. Previously that role had been fulfilled by ‘friends and family’ funding rounds. “We replace friends and family with the crowd.” The Beebonds ceiling is 75% of the “gap between the total cost and what the bank lent”, meaning there is still a friends and family round or other financing sources required.
The company started with real estate financing in Belgium, but has become increasingly keen on property developers in Luxembourg. The risk with any real estate project is that the promoter is not able to completely sell out the property. Given the grand duchy’s buoyant market, that “kind of risk doesn’t exist, because everything is sold after five minutes.” Real estate borrowers in Luxembourg primarily seek funding to help purchase land for development, while those in Belgium seek to cover construction costs.
For the moment, Beebonds concentrates on residential real estate, but Duysan said it could expand into office, logistics and educational properties. In addition to Belgium and Luxembourg, it has crowdlent to developments in Spain and in theory “we are able to finance projects” anywhere in the EU.
Corporate lending
Beebonds funnels investments into corporate projects as well. “We financed Pitaya,” a Thai street food franchise with 90 restaurants in France that is opening a location in Luxembourg. The franchisee raised €1.5m, Duysan reported. In the wake of covid shutdowns, banks “didn’t want to finance them, [but] we’re financing the franchise in Benelux.” It also worked with Yoga Home, a yoga studio.
The pitch for investors
Duysan positioned the company as providing access and yields to retail savers that normally would be reserved for institutional investors or wealth management clients. Promoters are paying an annual interest rate of up to 9%, a yield offered by “no bank, no fund manager”. The minimum investment is a fraction of the €125,000 starting point for wealth management funds, he said.
After potential investors set up an account on the platform and clear required checks, the minimum investment amount is €500. Duysan said the medium investment is “about €12,000”. Most punters are individual investors, but professional investors such as investment firms and insurers have taken tickets of €100,000, he stated. Investors come from across the EU, as well as Israel, Monaco and Switzerland.
Investors then “receive all the information about all the projects that we put on the platform and then it’s your choice. That that’s a big deal for people, that we give the choice to the investor. We don’t give any advice,” he said.
Unlike many other forms of private financing, Beebonds notes are liquid. They can be sold before the fixed redemption date on the Brussels stock exchange’s Expert Market.
The platform has recorded a “zero default rate right now,” Duysan claimed. “Some real estate files have experienced delays following the covid crisis, but none have defaulted on final repayment.”
Costs and checks
Loans under a certain size would be unprofitable, he explained. That is partly due to the fact that all projects on the platform are independently reviewed by the consulting and audit firms Deloitte or PwC. These third party checks are stressed in company materials and were heavily emphasised during the interview with Delano. It is “rare” to be able to invest in a friends and family round “under the supervision of PwC or Deloitte,” Duysan stated. “It’s very important for us that this analysis be done, but there is a cost. And that’s why we don’t do any project under €500,000.”
Both Deloitte and PwC told Delano that they do not provide opinions on the investments on Beebond’s platform. “We analyse the information received from the issuer, and write the descriptive note for the project in question,” a spokesman for PwC in Belgium stated. “PwC is not responsible for the business plan, and we do not carry out audits of the projects nor of the issuing entities.”
“We just make sure the information which is communicated” complies with the requirements of the Belgian financial regulator FSMA, a spokeswoman for Deloitte in Belgium said.
Bee hives
After each project is funded, Beebonds underwrites a beehive managed by Ukeepers, an urban beekeeping group in Brussels. Why bees? Duysan likened his platform to the role of bees collecting pollen, returning to the hive and creating honey. Instead of honey, “we make bonds.”
Duysan argued that Beebonds was ideal for investors who want to contribute to the real economy and “not speculate on the stock market. Because when you finance a real estate project, you finance the people working in construction, working in the real estate agency… my dream was to make money go back into real life, a true financial product, not something to speculate about.”