Smart Crowd Limited (Smart Crowd) is regulated by the DFSA. Smart Crowds DFSA Licence is a restricted “Innovation Testing Licence” and it is restricted under the Licence to testing its platform.
Due to the limited nature of its Licence, normal Client protections may not apply and Clients may have limited rights if they suffer loss because of taking part in testing.
Smart Crowd does not remove any of the risks that you may experience should you acquire a residential property directly and outright (i.e. without a mortgage). Some additional risks are introduced by virtue of shared ownership and timing of your exit.
We encourage you to diversify your Smart Crowd investments across multiple properties to safeguard against excessive exposure to any one property that could incur issues such as tenant default or a problem specific to that property that impacts valuation.
Whilst Smart Crowd provides gross rental income estimates based on information from third parties, these are not guaranteed. It may be that lower rents are secured. Furthermore, rental income could cease completely for certain periods. In the event of a tenant failing to meet its obligations to the owner of the property, investors will experience a fall in the cash receipts and cash available for distribution to them. From time to time, vacancies can be expected to arise in the operation of real estate assets. In some cases, sizable vacancies may mean there is less cash available for distribution to investors.
Investment in real estate is speculative, the market value of property can fall and rental income is not guaranteed;
Forecasts and past performance are not a reliable indicator of future performance.
The real estate market can experience downturn effecting your property valuation
The value of your Smart Crowd investment can go down as well as up and historic performance is not a guide to future performance. Achievement of rental and capital returns will depend on a range of factors including the property asset as well as the wider economy. A fall in the value of your investment may be due to a number of reasons, such as a fall in the underlying value of the property or a problem with the property that will need to be funded from future rental income. Real estate investments can perform in a cyclical way, and values may increase or decrease accordingly. Economic, political and legal issues can affect values as they would other asset classes. Any future downturn in the real estate market could materially adversely affect the value and income generated from a property investment. Investors are to individually assess and establish their level of comfort with this risk from the outset.
If for any reason the operator ceases to carry on its business, investors may lose their capital money, incur costs or experience delays in the investment being wound up.
Ownership in non-tradable shares
Investors will not own the property; rather the investor will have an interest in another legal entity that owns the property. As the investor’s interest in that entity is not listed or traded, it is likely to be an ‘illiquid’ investment; that is, it may be difficult to sell the interest because of a lack of investors willing to buy such an interest. So the investor must be prepared to commit to investing for the full investment period.
As real estate is an ‘illiquid asset’; that is, an asset that cannot always be easily sold, it may be difficult to sell the property at the end of the investment period, resulting in a delay in investors receiving their capital or in the property being sold at a loss.
Once the secondary market is operational, you will be able to advertise your investment for sale to other Smart Crowd users at any point. However, there may not be anyone willing to buy your investment at a price that you deem reasonable (or buy it at all). In that event you will be required to wait until the end of the investment term for an exit. Even at this point, the timing and ability to exit will depend on completion of a transaction to sell the underlying property. This transaction could take several months.
Smart Crowd does not provide any investment advice and no assessment is made to determine if an investment is suitable for investors. All information is provided to help you make your own informed decisions. You must rely on your own due diligence before investing, if in doubt, please seek the advice of an independent financial adviser.
Client Money is held by Smart Crowd in a segregated Client Account with Global Custodian Services (GCS). GCS is a UK company, authorised and regulated by the Financial Conduct Authority and holds Part IV Permissions under the FSMA 2000. Registration number 595875, as such GCS are fully regulated to hold client money for the purpose of investment. Whilst GCS is accountable to Smart Crowd for the safe keeping of its Client Money, GCS does not have a relationship with Smart Crowds clients directly. Therefore, Smart Crowd is wholly accountable for our investors “Client Money”. Smart Crowd has undertaken due diligence of GCS’s custodial systems and controls and deemed fit and proper to hold Client Money on Smart Crowds behalf.
Clients of SmartCrowd are subject to the protection conferred by the DFSA’s Client Money Provisions and therefore:
- this Money will be held separate from Money belonging to SmartCrowd; and
- in the event of the Authorised Firm’s insolvency, winding up or other Distribution Event stipulated by the DFSA, the Client’s Money will be subject to the DFSA’s Client Money Distribution Rules.
- Interest on Client Money is not payable to you as a Client of Smart Crowd.
As noted above Client Money will be held in the UK, outside the DIFC and the market practices, insolvency and legal regime applicable in that jurisdiction may differ from the regime applicable in the DIFC.
Clients should be aware of potential conflict of interest while investing via the Smart Crowd Platform. In the initial phase, many of the real estate activities, such as brokerage and property management will be handled by ERE Homes.
ERE Homes is a commercial real estate services provider located in Dubai. ERE Homes is 100% owned by a director and key shareholder of SmartCrowd. ERE Homes performs the functions of Property Manager, Broker and property identifier on behalf of the SmartCrowd platform. ERE Homes will receive a fee for their services, from SmartCrowd.There will be not additional charges to customers and these fees will be covered by Smart Crowd from the fees it charges to end users. This arrangement could potentially create conflict of interest.
SmartCrowd manages this conflict of interest in the following ways:
- We disclose the conflict to our client’s.
- We disclose fees to be paid to property managers and brokers including ERE Homes on the property profile page.
- Prior to a property being listed on the SmartCrowd platform, a due diligence report will be undertaken. The due diligence report and property will then be assessed by the Directors of SmartCrowd and must be approved for listing. In cases where the property has been introduced by ERE Homes, the director who is the owner of ERE Homes will abstain from being part of the approval process and the approval for listing must be by unanimous voting of the other 2 directors.