June 3, 2024 • 29 mins
Welcome to another exciting episode of the Wise Wealth podcast! In this unique episode, host Samuel Leach welcomes Lily Feng, co-founder of Jera Wine. This pioneering lending platform allows collectors and investors to borrow against their fine wine collections.
Lily shares her fascinating journey from a tech background in Silicon Valley to co-founding Jera Wine. She discusses how the idea for the platform was born out of a passion for wine and the need for liquidity in wine collections, especially during the COVID-19 pandemic.
The episode delves into the mechanics of Jera Wine's lending process, the types of clients they serve, and how the platform's unique infrastructure supports its operations. Lily also touches on the challenges and opportunities in the wine lending market, including the potential for future innovations and partnerships.
Whether you're a wine enthusiast, an investor, or simply curious about alternative asset lending, this episode offers a deep dive into an emerging financial frontier. Tune in to discover how Jera Wine is transforming the way we think about fine wine as an investment!
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Transcript
Episode Transcript
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(00:00):
Welcome back, everybody, to the Wise World podcast. Super excited to get into this episode.
It's a very different one. I don't think we've covered anything like it before
on Wise World, so it's really exciting.
I'm going to let Lily introduce herself and go through exactly how she ended
up down this pathway and developing this awesome company.
(00:21):
So over to you, Lily. Thanks for joining.
Thank you so much, Samo. Thank you very much for the opportunity.
Hi, everyone. My name is Lily Feng. I'm the co-founder for Jera Wine.
We are essentially a lending platform that allows collectors and investors to
borrow against their fine wine collection.
So I suppose, how did you end up on this journey to end up in this industry?
(00:45):
Yeah, so my background actually comes from technology.
So I worked in Silicon Valley for over a decade and then moved to Asia,
continued to work in the tech world and worked for both consumer and SaaS enterprise platforms.
And wine is just a passion to start with.
When I was in Silicon Valley, we make often trips to Napa.
(01:07):
That's where I learned about wine and fall in love with the Napa Cavs.
And it just remained a passion for a long time and until COVID.
That's when I think everyone starts sucking up on wine and start looking into
their wine collections and portfolios and realizing how much especially you
bought champagne painting more burgundy, how much your collection has appreciated
(01:29):
within the last five years.
And the conversation just came naturally among my friends.
Well, it's great to see the numbers getting bigger and better for your collection,
but there's really not that much liquidity out of the collection per se.
When you bought your probably a few bottles burgundy back in the days for a
hundred bucks, and now it's two or 300 and you kind of start hesitating,
(01:53):
well, do I actually you want to drink it? Or do I want to sell it?
But then outside of selling in a secondary market, is there really no other
way of getting liquidity out of the collection?
So that's essentially where the idea came from. Well, we start thinking if you
can borrow against properties or you can borrow against art,
why not borrow against fine wine?
And I decided to give that a try, explore the idea, and just got down into this
(02:19):
path and has not turned my head back and really enjoyed the journey of learning
about the wine industry,
building the lending platform, and just be able to kind of talk to all the wine
lovers and collectors about what we can do with their wine collections.
So how long has Jira Wine been around for? Yeah, so we started in 2022.
That's when we started exploring the idea, looking into the feasibilities,
(02:42):
because a lot actually goes into, you know, being a very tech person,
I kind of thought, great, I'll build a lending platform.
Everyone can just go online and put their collection in there.
And we do real-time valuation and then you submit an application.
But the reality is, as I learn more and more about the industry and go into
detail building this business, a lot goes into logistics, right?
Right. Everything happens after that.
(03:03):
How are you going to inspect the wine?
How are you going to really put together the logistic elements and shipping
the wine to the warehouse, do the inspections and work through the legal paperwork?
And so we started in 2022, start building the platform.
And in 2023, that's when we started doing what we call the beta phase or the pilot run.
We're through our own networks and introduce the concept to a few wine lovers
(03:26):
and businesses in the wine tray. and we did a few loans in 2022, 2023, sorry.
And then we officially launched beginning of this year.
It's super interesting because, so is it, for example, I work closely with property
lending and so on and so forth.
And there's different pools of investors that come in to actually fulfill that
(03:50):
loan, you know, whether it be private investors, institutional funds.
Who's driving the funding behind the loans? Is it you as an individual or is
it, you know, institutional funds, private investors? How does it work?
Yeah, so Jira Wine actually belongs to Codery Holdings, which is a group entity
that owns various different interests in the wine trade in the UK.
(04:12):
So under the group, we have wine merchants. We have merchants that trade to
sell wine essentially to trade players, so restaurants and supermarkets.
And we also have within a group, an independent warehouse designed specifically for wine storage.
And so the funding of the lending capital come from the group.
(04:33):
Wow. And have you done like a good amount of lending?
Is it just on the starting grounds at the moment? Or would you say you're fully
established and you've lent out $10 million, $20 million, $30 million or more? Yeah.
So to our surprise, when we did the soft launch or the beta launch in 2023,
(04:53):
we thought we'd just kind of introduce a concept because it's relatively a new
concept in the marketplace.
So we introduced to a few wine collectors we know and also through our sister companies in the group.
We talked to a few of the wine merchants and players in the space and just giving
a general feedback on will people be interested.
It and just in 2023 alone to
(05:16):
our surprise we actually lend out 10 million in loan
book value and of course we continue to do that this
year and so now we're about 15 million wow and
it's it's really interesting because just trying to get my head around it so
when what type of person what you know when they i understand it's sort of like
(05:37):
they're utilizing now freed up liquidity on something that was you know previously
illiquid and sort of sat in storage it was accruing value.
Now you know when when i relate this to
something sort of like property when you're talking about property you're usually
the the person that is usually taking on the loan is either doing development
(05:58):
improvement to that property to increase the value like redevelopment or bridging
finance for example what sort of borrower is utilizing this and then what are
they using that That loan for the space is quite interesting aspect.
Yeah, great question. So we offer both loans to high net worth individuals as well as to business.
For commercial loans, you know, we have restaurant groups, we have family offices
(06:23):
that have a one collection, and we have merchants in the business.
The scenario kind of varies, right? So if you lend to a family office that has one collection,
it's probably because they have bought previously and then now they have interesting
projects popping up and they really want to utilize the capital and be able
to invest into some of the additional projects that they get approached for.
(06:44):
So oftentimes they would take the wine collection as collateral and borrow from
us and then invest into other projects that might not be related to wine at all.
And for the businesses that tend to borrow, especially the merchants in the wine business,
oftentimes they get approached by private collectors saying,
hey, I'm done with wine or for health reasons, for personal reasons,
(07:07):
We can't keep this one collection anymore.
And I would like just to, you know, be able to sell it out the wholesaler.
And oftentimes, you know, it's a great opportunity for merchants and business
to buy out those private collections, but cash is tight for everyone, right?
And so this is a good use of our service to essentially be able to get a loan
(07:28):
from us and be able to acquire that collection and then either hold onto it
or start selling it and making, you know, start trading the secondary market.
So that's the, for commercial loans, that's what we tend to see.
And for individuals, the usage of it varies, right?
So it could be someone who also get approached for buying a friend's collection
or wanting to, you know, essentially invest and do a bigger play in buying either
(07:53):
Bordeaux and Promers or actually buying some other regions'
wine that individuals start developing an interest in, or it could just be for
personal use. Yeah, it's very interesting.
It's exciting, I suppose. And I suppose, do you see many competitors within
the industry at this moment in time for that?
No. So that's what, when we first started looking into this idea,
(08:15):
all we found is one particular company in the US actually that specialize in
lending against fine wine.
Everything else, I think it's what everyone see in the marketplace,
whereas lending against alternative assets.
So they're not specialized in wine. And I would say we are probably the only
fully tech-driven platform in the UK that does special lines and wine lending.
(08:37):
And we can do that for various reasons. I think one of the biggest benefits
for us is to be part of this group where we have warehouses that we can use and trust.
And we ask our borrower to ship their wine into our warehouse during the term of the loan.
And then also in case of default, thankfully we haven't had any default,
but we do as a business have to prepare for that. And in that case,
(09:00):
be able to have the channels to essentially sell the collections through the
secondary market is very critical to us.
So having that infrastructure and I have to say for the overall UK market is
quite mature when it comes to handling secondary market tradings,
having the right warehouse inbound bonded structure to really be able to support us to do what we do.
(09:20):
We have actually looked into previously, other banks actually wrote articles
and papers about it. They're quite interested in this approach and in wine as
an alternative asset to lindegans.
But the challenge with that is that infrastructure I just described,
right? For banks to go into it, they'll have to figure out a partner warehouse.
They have to figure out the merchants they can work with at their channels in case of default.
(09:43):
And it's quite a bit of work for them to set up. And so that's why I think we've
seen quite a few papers from a few banks saying, you know, wine is a great investment
alternative asset, and it will be interesting to be able to lend against it.
But we haven't seen any bank actually executing for the reasons,
as I mentioned, that behind the scenes, the logistic element is actually quite a bit of work.
And you do need a very structured entity and also infrastructure to be able to support it.
(10:09):
Yeah, for sure. Sure. And I suppose having, you basically have got a turnkey
solution because of your group, you've basically got all of those different
avenues in the turnkey solution to be able to manage that side of things.
Yeah. So you're sort of already ahead of the game, so to speak.
And obviously with your tech background, being able to build out the platform,
(10:30):
you've sort of got the winning piece, so to speak.
I saw on your website that you do 70% loan to value.
Now, Now, that's quite confident that, you know, it's true, you know,
ideally for, you know, a good load of value, you're sort of looking at around
50 to 60% would be the nice level.
(10:52):
But when you're looking at, you know, 70%, now talk to me like I know nothing
about wine, but are you saying that there's not 30% volatility in wine?
I'm interested to explore that a little bit further around that.
That would be interesting.
Yeah, that's a great question. So what we have is, let me first clarify,
(11:18):
when we say we lean against fine wine, we're really looking for the premium
fine wine that has a secondary market value.
Unfortunately, wine and wine are not, you know, you can't really compare all
of them apple to apples. there is the drinking wine that I don't mind just open
for dinner or open for, or just afternoon with a book, right?
And you just enjoy because you love the wine and you enjoy the taste of it.
(11:43):
And then there is the wines that really do age, age quite well,
and do appreciate over time and value.
And that's the category that the wines that actually age beautifully and has
secondary market values is what we lend against.
And now out of that group of Y, we handpicked about, I would say, 500 of them.
(12:04):
And that list has constantly been edited every quarter.
But we handpicked the top 500 in our mind when it comes to the branding.
The ability to vote its value, and its popularity in the secondary market.
And these are the ones that we have 20 years of historical data we purchased
from LIBEX. We have our own in-house algorithm calculating and forecasting the
(12:27):
pricing trend, the directions of the pricing for that wine for different vintages.
And then also we have our own algorithm in terms of how do we set the LTVs on.
Actually, it's all rule based, right? It's based on the future forecast of the
pricing trend, the condition of the bottle, as well as the duty status of the wine.
In the UK, that's particularly important to us because if the wine stayed inbound,
(12:51):
then, of course, it gives us a lot of comfort when it comes to the provenance.
And there's various – and drinking window is another factor into it.
So we take all these into consideration and have set our own internal evaluation rules.
And then that's how we calculate the LTV. So for the – really the top-notch,
perfect, pristine condition for wines that we know holds value over time and
(13:13):
has been very popular in the secondary market, it, we do feel quite comfortable setting the LTV to 70.
But that said, there are certain wines that, you know, wines I think actually
listened to your episode with Aaron recently about whiskey.
It's true. There is the trend and go in and out fashions for specific wines.
And that's why it's critical for us to update that list and refresh it on a
(13:36):
regular basis and really be able to kind of see the market fluctuations,
the pricing of individual wines.
And the LTV does automatically get adjusted based on that.
That is, yeah, and so what rates are these sort of in, you know,
people that are borrowing, what rates are they paying?
Yeah. So our interest rates, it matches overall the marketplace.
(13:57):
We constantly reference our rate against the market.
When we first started in 2023, of course, the overall market is interest rates
quite, relatively speaking, lower than today.
And over time, as the overall cost of capital increases, we also have to adjust our rate.
So I would say our rate is competitive in the marketplace, but it does get adjusted
(14:19):
according to the market fluctuations. situations.
That's interesting. Yeah. Because for example, in property sort of looking,
anywhere between sort of nine and I would say 10 and a half percent roughly
for a cost, are those similar rates or thing that you would sort of anticipate
you could see in wine or is it slightly higher?
(14:40):
Similar, but slightly higher, but we're not talking about a huge difference. Yeah.
Yeah, I know. It's very interesting to see. And what sort of factors would affect,
affect the pricing of wine?
I know you mentioned a fair few, but like, for example, is it specifically about
the wine or is there economic factors that can come into account such as inflation.
(15:03):
You know, such as recessions, or you find that because they are of that premium
level, they're not affected?
It'd be really interesting to see your thought process around.
Yeah, no, great question. Actually, ever since we started in 2022 to now,
Now, we have seen quite a bit of a change in the marketplace.
So wine, like any other alternative assets, I would say, actually,
it follows the overall macro economy.
(15:25):
And in 2022, when everyone is like at home in COVID, everyone starts collecting wine.
And it was a good two years for the wine industry.
And we have seen some pretty record increases and appreciations for some of
the wines, especially in Burgundy and Champagne areas. And as the overall economy
(15:46):
going through adjustment, the wine market is also going through adjustment.
So it does, I would say, overall follows the overall economy cycles, economic cycles.
And so yeah, the, there is no such thing as there's, you know,
the price just holds and never drops.
And, but I would say it actually, there's a lot of factors goes into it.
(16:08):
But supply and demand is definitely wine.
And that's one Burgundy is, even though we are going through adjustment,
but you can see some of the really top Burgundies still relatively compared
to the rest of the market did not go through as big of adjustment.
But what we see actually since 2022 to now is the demand for actually it alone.
Because back in 2022 and even earlier part of 2023, the secondary market is very active.
(16:32):
People are actively trading their wine because the wine market was doing quite
well and a lot of appreciation happen for people who bought earlier.
But now the wine market is also slowed down just as the overall,
you know, overall economy.
And we've seen that sometimes you can still have a very great wine,
but it just takes longer to sell.
And then instead of waiting for it to kind of come to the right price that you
(16:57):
have in mind, or just taking,
going through a longer selling cycles, we start seeing a lot of collectors coming
to us say, hey, why don't I just actually take a loan out instead of competing
in this down market for price?
Because one is if you put your wine up for sale now, it takes longer to sell.
And two is you're probably getting a lot of price pressures from the marketplace
(17:17):
because to be honest, a lot of people are out selling their wine and there's a lot of competition.
And three, actually a lot of the collectors, as we know, started collecting
wine because they love wine and it's their passion.
And there's a lot of emotional attachments to the collection and they're not
ready to part away with their collection yet and they don't want to sell.
And so loan is you know a great
(17:39):
way of getting liquidity out of that collection without parting
away with your wine yeah and i suppose sort of like what you said that sometimes
it's hard to sell the wine obviously looking from your side of the platform
is a risk of like default and stuff like that what is the average sort of time
frame i suppose it's dependent on what it is but like Like, you know, we're talking a month,
(18:02):
six months, 12 months to potentially offload.
What does that usually look like?
Yeah, it's a great question. So we do actually look into that data a little bit.
I would say actually it varies and it varies based on the market and people's preferences.
This is actually very interesting to kind of study into the wine market.
It's like looking at the stock market sometimes.
(18:25):
There's a lot of psychology that goes in there, right? So for example,
when last year, I think Burgundy's prices were still quite high and you can
see actually Bordeaux selling very quick.
You can sell your Burgundy at a really good price, but it just naturally takes
a little bit longer because especially if you're selling the top Burgundy's, right?
Because the ticket price per model is just very high. So people do think a little
(18:47):
bit before they make the purchase.
In comparison, you start noticing Champagnes and Bordeaux actually selling really
quick and Italian as well. That's because- You do classes really quick.
Actually, we have seen within weeks, actually, from listing to actually sell.
So we're talking about depends on what type of what specific wine it is.
(19:07):
I believe when we look at the average selling cycle for Bordeaux from listing
to actually sold is within one month.
Sometimes I think shortens to 20 days and depends on how big.
Again, this all depends on which platform you're listed on.
As we know, there's no one centralized platform for secondary market trading.
But average speaking, Bordeaux's can go as quickly. Champagne actually went
(19:29):
fastest from what we see. It can be within a week or 10 days.
Bordeaux comes second where it's 20 days or so within a month.
And Burgundy sometimes can sit there a little bit, but you do actually get that
price, that appreciation or margin out of it. But it just sometimes it does
take a little bit longer to sell.
And then with Italians, depends on which specific type, which specific producers.
(19:54):
And it can also go very fast and it's hot in demand.
Now, again, that was last year. And this year, overall, I think the market is
people are a lot more cautious, right?
Spending wise for everything, not just wine. So I think it does,
at different times, and with the overall macro economic backdrop,
it does actually impact how quickly the wines sell in the secondary market.
(20:18):
And it also depends what wine it is and what vintage it is.
Yeah. So there's a lot of factors that come in, but it could be as quick as
in the weeks or months to actually shift it.
But overall, that's interesting. I picked up there that you mentioned there
isn't one centralized place to sell. Is that something that's on your goal for
(20:39):
the platform to create an exchange for wine?
That's a great question. No, right now we're very much focused on lending and
lending activities. But yeah, I think it's, you know, it's very interesting.
UK is actually one of the capital countries for wine trade, as we learned when
we start embarking on this journey of doing wine lending.
(21:00):
And it's just the secondary market is very active, certainly the case in every country.
And the reason why it can't be done is because the infrastructure behind it, right?
The warehouse, the bounded warehouse structure, and really just a very active
one merchant market and industry in general.
So I think it does actually provide what we need in terms of in case of default,
(21:24):
be able to kind of go through these channels and to really sell.
So we actually partner with quite a few merchants in the market for that specific
reason and to be able to essentially, if we need to, we have channels available
for us to sell these loans.
Do you ever foresee allowing private investors to come onto your platform and
to be able to fulfill that loan?
(21:45):
Or do you think it will maintain within your group to fulfill those loans in the future?
No, we're actually welcome interested parties. So feel free to reach out and talk to us.
We started with the group because it makes sense where we have all the infrastructure
already in place and we can actually get the investment perspective.
(22:05):
Yeah, I think you'll be surprised. I think there'll probably be quite a fair
few people that are interested in investing.
As you mentioned before, the property investment side, the art side is really
sort of taken off. And I think that, you know, the next sort of space is looking
at wine and going down that route.
I think it's an interesting, it's interesting to see it in the same sort of
(22:29):
light as sort of collateral.
And for you, I suppose you're physically holding, you're physically holding
that wine and storage whilst that loan is active. Is that right?
Yeah. If you don't mind, let me spend a quick 30 seconds explaining the process.
So essentially, for anyone who's interested in our service can go onto our website
and then just import in your wine collection.
(22:50):
And what we'll do is we show the current market value right away.
And then we do, if you're interested in submitting a loan application,
we will then go through our LTV calculation algorithms to essentially tell you
for that specific bottle, what is the LTV ratio we can offer.
And if the client is interested, what we ask is the borrower to,
(23:11):
potential borrower, to ship their wine into Coda Revolve, our warehouse,
which is state of our facility for wine storage specifically.
And then that's when we do the physical inspection of the bottle.
So we take 360 high-res photos and we have our staff there physically inspect
the bottle and document any conditions potentially on the bottle.
(23:33):
And then based on all the information, we do a final quotation for the loan.
And that's when we set the final LTV.
I find it very interesting. I think it's very exciting.
And I think you'll be surprised if you did open it up to private investors to
come on and be a part of that journey.
(23:54):
I think that there's different risks in investing into certain properties,
especially from a lending side. I think that goes without a given.
From a property side, if you're lending against that and
the development doesn't go well you know there's issues on that
side what sort of risks do you have
(24:14):
in and lending against those wine
is it is it reduced i suppose the storage facility would be in risk if something
happened to the storage facility where the where the where the wine was kept
is there any is there any other big risks like that or is it insured in that
respect because i suppose you could insure it yeah it is yeah exactly so warehouse
definitely is one but it It is fully insured.
(24:36):
And then the other part I think is really, in my mind, is it's really the prominence of the wine, right?
And that's why we check with the borrower in terms of where did they purchased
it and has it always been inbound or is duty paid.
If it's duty paid, it means it's probably left the bonded warehouse.
And we do actually have to do additional inspections and also do lower the LTV
(24:59):
for the potential risk. So we try to incorporate all these potential risks into
the LTV algorithm calculations.
And the other part is really just be able to stay to your point,
stay up to keep up with the market directions and trends and prices.
Since we start till now, the market has actually gone through quite a bit of changes, right?
From really the wines appreciating quite a bit to going through adjustment cycle from being able to,
(25:25):
said, my market trading be very active. So now a little bit,
I wouldn't say it's still there. The activity transaction is still happening,
but it's probably slower.
And people's preference shift, right? A lot of people, when I started looking
into it, it's because Burgundy and Champagnes are doing so well.
But now everyone's like, well, Burgundy's might be a little bit too rich for us to purchase.
And people start looking at this year's Bordeaux on Premier seems to do pretty well.
(25:49):
And Italians picking up popularities. So the market is constantly changing.
And I think for us to really that our job is to make sure we keep up with it
and continue with the pricing analysis and understanding where the market is
going and understanding very the overall the trends and the new regions that
people are interested in so we can add to our list and do a better job with our LTV evaluations.
(26:14):
Have you ever thought of maybe on your platform allowing individuals to,
you know, actually purchase into set wines or, you know, using your 360 approach,
you know, if you've got something that you can say actually over the next five
to 10 years, we anticipate this would appreciate by X, Y, and Zed have private
(26:34):
investors to buy a slice of, you know, fractional ownership of that, of that wine.
Have you ever sort of going down that route and open up the doorways down there?
That's a great idea, actually. No, that's a great idea. And I think it makes a lot of sense, right?
Especially now we have actually accumulated quite a bit of collateral.
(26:56):
But so far, thank goodness, our borrowers have been very pumped with their payments
and everything. And we don't see any risk for default.
But in the future, I can see that for borrowers, potentially not even default
situation, but they simply just actually, as they go through the loan terms
and they realize, well, actually, I'm okay for selling this one.
Wine and they want to release some of the wine as collaterals to
(27:18):
to the market and actually use the proceeds from
selling the wine to pay down the loan that's totally fine with us
as well and then we can actually open up as you said
to the public if they're interested in purchasing it no
that that's a great idea we probably will definitely look.
Into it they're taking some notes here
yeah exactly getting some ideas thank you
(27:39):
well yeah i would like i said it's
been amazing talking to you i don't want to keep you too long but i think
you know from from my side it'd be great to be updated
with how the journey goes maybe get you
on the podcast in the future as well and just
to find out how how these different areas develop and how
the market develops because you know once you
(28:00):
start getting into that side of you know you've got a great loan book
at the moment and it's growing and there's interest there and i
think opening up to the public to be able to you know
use your expertise to actually go do you know what here's a
great investment for buying into this and
based off of all of this research that you've already done because if you're
looking at that from a an ltv point of view the information and research is
(28:22):
already there isn't it so it's like you know presenting that and offering the
ability for people like me who's not so savvy on wine but loving i love investing
into property i love investing into.
You know bridging and that sort of finance as well as the stock market and a
lot that a lot of the listeners and audience from this do the same thing they
(28:43):
love investing into these things so if there was a an opportunity to be involved
in that i think people would be rather excited,
to to get involved for sure yeah thank
you so much now looking forward to anyone interested feel
free to reach out to us we would love to see you know
what we can do and then also thank you you for the
invite for i'd love to actually keep you up to date and
(29:05):
perhaps update you and the audience later on our
journey for now now we're officially launched so we'll be yeah definitely excited
and to share our journey with everyone yeah and where would be the best place
for listeners to come learn more about your business yeah great question so
um can you can visit us on at gerawine.com.
(29:26):
That's J-E-R-A-W-I-N-E.com. And also you can reach us through LinkedIn.
So feel free to drop a message both on the website or through LinkedIn.
And we have a team monitor that all the time.
And so love to talk to anyone who's interested either in the service or interested in an investment.
Awesome. Thank you so much for coming on. I really appreciate it.
(29:48):
Thank you. Thank you so much.
Welcome back, everybody, to the Wise World podcast. Super excited to get into this episode.
It's a very different one. I don't think we've covered anything like it before
on Wise World, so it's really exciting.
I'm going to let Lily introduce herself and go through exactly how she ended
up down this pathway and developing this awesome company.
(00:21):
So over to you, Lily. Thanks for joining.
Thank you so much, Samo. Thank you very much for the opportunity.
Hi, everyone. My name is Lily Feng. I'm the co-founder for Jera Wine.
We are essentially a lending platform that allows collectors and investors to
borrow against their fine wine collection.
So I suppose, how did you end up on this journey to end up in this industry?
(00:45):
Yeah, so my background actually comes from technology.
So I worked in Silicon Valley for over a decade and then moved to Asia,
continued to work in the tech world and worked for both consumer and SaaS enterprise platforms.
And wine is just a passion to start with.
When I was in Silicon Valley, we make often trips to Napa.
(01:07):
That's where I learned about wine and fall in love with the Napa Cavs.
And it just remained a passion for a long time and until COVID.
That's when I think everyone starts sucking up on wine and start looking into
their wine collections and portfolios and realizing how much especially you
bought champagne painting more burgundy, how much your collection has appreciated
(01:29):
within the last five years.
And the conversation just came naturally among my friends.
Well, it's great to see the numbers getting bigger and better for your collection,
but there's really not that much liquidity out of the collection per se.
When you bought your probably a few bottles burgundy back in the days for a
hundred bucks, and now it's two or 300 and you kind of start hesitating,
(01:53):
well, do I actually you want to drink it? Or do I want to sell it?
But then outside of selling in a secondary market, is there really no other
way of getting liquidity out of the collection?
So that's essentially where the idea came from. Well, we start thinking if you
can borrow against properties or you can borrow against art,
why not borrow against fine wine?
And I decided to give that a try, explore the idea, and just got down into this
(02:19):
path and has not turned my head back and really enjoyed the journey of learning
about the wine industry,
building the lending platform, and just be able to kind of talk to all the wine
lovers and collectors about what we can do with their wine collections.
So how long has Jira Wine been around for? Yeah, so we started in 2022.
That's when we started exploring the idea, looking into the feasibilities,
(02:42):
because a lot actually goes into, you know, being a very tech person,
I kind of thought, great, I'll build a lending platform.
Everyone can just go online and put their collection in there.
And we do real-time valuation and then you submit an application.
But the reality is, as I learn more and more about the industry and go into
detail building this business, a lot goes into logistics, right?
Right. Everything happens after that.
(03:03):
How are you going to inspect the wine?
How are you going to really put together the logistic elements and shipping
the wine to the warehouse, do the inspections and work through the legal paperwork?
And so we started in 2022, start building the platform.
And in 2023, that's when we started doing what we call the beta phase or the pilot run.
We're through our own networks and introduce the concept to a few wine lovers
(03:26):
and businesses in the wine tray. and we did a few loans in 2022, 2023, sorry.
And then we officially launched beginning of this year.
It's super interesting because, so is it, for example, I work closely with property
lending and so on and so forth.
And there's different pools of investors that come in to actually fulfill that
(03:50):
loan, you know, whether it be private investors, institutional funds.
Who's driving the funding behind the loans? Is it you as an individual or is
it, you know, institutional funds, private investors? How does it work?
Yeah, so Jira Wine actually belongs to Codery Holdings, which is a group entity
that owns various different interests in the wine trade in the UK.
(04:12):
So under the group, we have wine merchants. We have merchants that trade to
sell wine essentially to trade players, so restaurants and supermarkets.
And we also have within a group, an independent warehouse designed specifically for wine storage.
And so the funding of the lending capital come from the group.
(04:33):
Wow. And have you done like a good amount of lending?
Is it just on the starting grounds at the moment? Or would you say you're fully
established and you've lent out $10 million, $20 million, $30 million or more? Yeah.
So to our surprise, when we did the soft launch or the beta launch in 2023,
(04:53):
we thought we'd just kind of introduce a concept because it's relatively a new
concept in the marketplace.
So we introduced to a few wine collectors we know and also through our sister companies in the group.
We talked to a few of the wine merchants and players in the space and just giving
a general feedback on will people be interested.
It and just in 2023 alone to
(05:16):
our surprise we actually lend out 10 million in loan
book value and of course we continue to do that this
year and so now we're about 15 million wow and
it's it's really interesting because just trying to get my head around it so
when what type of person what you know when they i understand it's sort of like
(05:37):
they're utilizing now freed up liquidity on something that was you know previously
illiquid and sort of sat in storage it was accruing value.
Now you know when when i relate this to
something sort of like property when you're talking about property you're usually
the the person that is usually taking on the loan is either doing development
(05:58):
improvement to that property to increase the value like redevelopment or bridging
finance for example what sort of borrower is utilizing this and then what are
they using that That loan for the space is quite interesting aspect.
Yeah, great question. So we offer both loans to high net worth individuals as well as to business.
For commercial loans, you know, we have restaurant groups, we have family offices
(06:23):
that have a one collection, and we have merchants in the business.
The scenario kind of varies, right? So if you lend to a family office that has one collection,
it's probably because they have bought previously and then now they have interesting
projects popping up and they really want to utilize the capital and be able
to invest into some of the additional projects that they get approached for.
(06:44):
So oftentimes they would take the wine collection as collateral and borrow from
us and then invest into other projects that might not be related to wine at all.
And for the businesses that tend to borrow, especially the merchants in the wine business,
oftentimes they get approached by private collectors saying,
hey, I'm done with wine or for health reasons, for personal reasons,
(07:07):
We can't keep this one collection anymore.
And I would like just to, you know, be able to sell it out the wholesaler.
And oftentimes, you know, it's a great opportunity for merchants and business
to buy out those private collections, but cash is tight for everyone, right?
And so this is a good use of our service to essentially be able to get a loan
(07:28):
from us and be able to acquire that collection and then either hold onto it
or start selling it and making, you know, start trading the secondary market.
So that's the, for commercial loans, that's what we tend to see.
And for individuals, the usage of it varies, right?
So it could be someone who also get approached for buying a friend's collection
or wanting to, you know, essentially invest and do a bigger play in buying either
(07:53):
Bordeaux and Promers or actually buying some other regions'
wine that individuals start developing an interest in, or it could just be for
personal use. Yeah, it's very interesting.
It's exciting, I suppose. And I suppose, do you see many competitors within
the industry at this moment in time for that?
No. So that's what, when we first started looking into this idea,
(08:15):
all we found is one particular company in the US actually that specialize in
lending against fine wine.
Everything else, I think it's what everyone see in the marketplace,
whereas lending against alternative assets.
So they're not specialized in wine. And I would say we are probably the only
fully tech-driven platform in the UK that does special lines and wine lending.
(08:37):
And we can do that for various reasons. I think one of the biggest benefits
for us is to be part of this group where we have warehouses that we can use and trust.
And we ask our borrower to ship their wine into our warehouse during the term of the loan.
And then also in case of default, thankfully we haven't had any default,
but we do as a business have to prepare for that. And in that case,
(09:00):
be able to have the channels to essentially sell the collections through the
secondary market is very critical to us.
So having that infrastructure and I have to say for the overall UK market is
quite mature when it comes to handling secondary market tradings,
having the right warehouse inbound bonded structure to really be able to support us to do what we do.
(09:20):
We have actually looked into previously, other banks actually wrote articles
and papers about it. They're quite interested in this approach and in wine as
an alternative asset to lindegans.
But the challenge with that is that infrastructure I just described,
right? For banks to go into it, they'll have to figure out a partner warehouse.
They have to figure out the merchants they can work with at their channels in case of default.
(09:43):
And it's quite a bit of work for them to set up. And so that's why I think we've
seen quite a few papers from a few banks saying, you know, wine is a great investment
alternative asset, and it will be interesting to be able to lend against it.
But we haven't seen any bank actually executing for the reasons,
as I mentioned, that behind the scenes, the logistic element is actually quite a bit of work.
And you do need a very structured entity and also infrastructure to be able to support it.
(10:09):
Yeah, for sure. Sure. And I suppose having, you basically have got a turnkey
solution because of your group, you've basically got all of those different
avenues in the turnkey solution to be able to manage that side of things.
Yeah. So you're sort of already ahead of the game, so to speak.
And obviously with your tech background, being able to build out the platform,
(10:30):
you've sort of got the winning piece, so to speak.
I saw on your website that you do 70% loan to value.
Now, Now, that's quite confident that, you know, it's true, you know,
ideally for, you know, a good load of value, you're sort of looking at around
50 to 60% would be the nice level.
(10:52):
But when you're looking at, you know, 70%, now talk to me like I know nothing
about wine, but are you saying that there's not 30% volatility in wine?
I'm interested to explore that a little bit further around that.
That would be interesting.
Yeah, that's a great question. So what we have is, let me first clarify,
(11:18):
when we say we lean against fine wine, we're really looking for the premium
fine wine that has a secondary market value.
Unfortunately, wine and wine are not, you know, you can't really compare all
of them apple to apples. there is the drinking wine that I don't mind just open
for dinner or open for, or just afternoon with a book, right?
And you just enjoy because you love the wine and you enjoy the taste of it.
(11:43):
And then there is the wines that really do age, age quite well,
and do appreciate over time and value.
And that's the category that the wines that actually age beautifully and has
secondary market values is what we lend against.
And now out of that group of Y, we handpicked about, I would say, 500 of them.
(12:04):
And that list has constantly been edited every quarter.
But we handpicked the top 500 in our mind when it comes to the branding.
The ability to vote its value, and its popularity in the secondary market.
And these are the ones that we have 20 years of historical data we purchased
from LIBEX. We have our own in-house algorithm calculating and forecasting the
(12:27):
pricing trend, the directions of the pricing for that wine for different vintages.
And then also we have our own algorithm in terms of how do we set the LTVs on.
Actually, it's all rule based, right? It's based on the future forecast of the
pricing trend, the condition of the bottle, as well as the duty status of the wine.
In the UK, that's particularly important to us because if the wine stayed inbound,
(12:51):
then, of course, it gives us a lot of comfort when it comes to the provenance.
And there's various – and drinking window is another factor into it.
So we take all these into consideration and have set our own internal evaluation rules.
And then that's how we calculate the LTV. So for the – really the top-notch,
perfect, pristine condition for wines that we know holds value over time and
(13:13):
has been very popular in the secondary market, it, we do feel quite comfortable setting the LTV to 70.
But that said, there are certain wines that, you know, wines I think actually
listened to your episode with Aaron recently about whiskey.
It's true. There is the trend and go in and out fashions for specific wines.
And that's why it's critical for us to update that list and refresh it on a
(13:36):
regular basis and really be able to kind of see the market fluctuations,
the pricing of individual wines.
And the LTV does automatically get adjusted based on that.
That is, yeah, and so what rates are these sort of in, you know,
people that are borrowing, what rates are they paying?
Yeah. So our interest rates, it matches overall the marketplace.
(13:57):
We constantly reference our rate against the market.
When we first started in 2023, of course, the overall market is interest rates
quite, relatively speaking, lower than today.
And over time, as the overall cost of capital increases, we also have to adjust our rate.
So I would say our rate is competitive in the marketplace, but it does get adjusted
(14:19):
according to the market fluctuations. situations.
That's interesting. Yeah. Because for example, in property sort of looking,
anywhere between sort of nine and I would say 10 and a half percent roughly
for a cost, are those similar rates or thing that you would sort of anticipate
you could see in wine or is it slightly higher?
(14:40):
Similar, but slightly higher, but we're not talking about a huge difference. Yeah.
Yeah, I know. It's very interesting to see. And what sort of factors would affect,
affect the pricing of wine?
I know you mentioned a fair few, but like, for example, is it specifically about
the wine or is there economic factors that can come into account such as inflation.
(15:03):
You know, such as recessions, or you find that because they are of that premium
level, they're not affected?
It'd be really interesting to see your thought process around.
Yeah, no, great question. Actually, ever since we started in 2022 to now,
Now, we have seen quite a bit of a change in the marketplace.
So wine, like any other alternative assets, I would say, actually,
it follows the overall macro economy.
(15:25):
And in 2022, when everyone is like at home in COVID, everyone starts collecting wine.
And it was a good two years for the wine industry.
And we have seen some pretty record increases and appreciations for some of
the wines, especially in Burgundy and Champagne areas. And as the overall economy
(15:46):
going through adjustment, the wine market is also going through adjustment.
So it does, I would say, overall follows the overall economy cycles, economic cycles.
And so yeah, the, there is no such thing as there's, you know,
the price just holds and never drops.
And, but I would say it actually, there's a lot of factors goes into it.
(16:08):
But supply and demand is definitely wine.
And that's one Burgundy is, even though we are going through adjustment,
but you can see some of the really top Burgundies still relatively compared
to the rest of the market did not go through as big of adjustment.
But what we see actually since 2022 to now is the demand for actually it alone.
Because back in 2022 and even earlier part of 2023, the secondary market is very active.
(16:32):
People are actively trading their wine because the wine market was doing quite
well and a lot of appreciation happen for people who bought earlier.
But now the wine market is also slowed down just as the overall,
you know, overall economy.
And we've seen that sometimes you can still have a very great wine,
but it just takes longer to sell.
And then instead of waiting for it to kind of come to the right price that you
(16:57):
have in mind, or just taking,
going through a longer selling cycles, we start seeing a lot of collectors coming
to us say, hey, why don't I just actually take a loan out instead of competing
in this down market for price?
Because one is if you put your wine up for sale now, it takes longer to sell.
And two is you're probably getting a lot of price pressures from the marketplace
(17:17):
because to be honest, a lot of people are out selling their wine and there's a lot of competition.
And three, actually a lot of the collectors, as we know, started collecting
wine because they love wine and it's their passion.
And there's a lot of emotional attachments to the collection and they're not
ready to part away with their collection yet and they don't want to sell.
And so loan is you know a great
(17:39):
way of getting liquidity out of that collection without parting
away with your wine yeah and i suppose sort of like what you said that sometimes
it's hard to sell the wine obviously looking from your side of the platform
is a risk of like default and stuff like that what is the average sort of time
frame i suppose it's dependent on what it is but like Like, you know, we're talking a month,
(18:02):
six months, 12 months to potentially offload.
What does that usually look like?
Yeah, it's a great question. So we do actually look into that data a little bit.
I would say actually it varies and it varies based on the market and people's preferences.
This is actually very interesting to kind of study into the wine market.
It's like looking at the stock market sometimes.
(18:25):
There's a lot of psychology that goes in there, right? So for example,
when last year, I think Burgundy's prices were still quite high and you can
see actually Bordeaux selling very quick.
You can sell your Burgundy at a really good price, but it just naturally takes
a little bit longer because especially if you're selling the top Burgundy's, right?
Because the ticket price per model is just very high. So people do think a little
(18:47):
bit before they make the purchase.
In comparison, you start noticing Champagnes and Bordeaux actually selling really
quick and Italian as well. That's because- You do classes really quick.
Actually, we have seen within weeks, actually, from listing to actually sell.
So we're talking about depends on what type of what specific wine it is.
(19:07):
I believe when we look at the average selling cycle for Bordeaux from listing
to actually sold is within one month.
Sometimes I think shortens to 20 days and depends on how big.
Again, this all depends on which platform you're listed on.
As we know, there's no one centralized platform for secondary market trading.
But average speaking, Bordeaux's can go as quickly. Champagne actually went
(19:29):
fastest from what we see. It can be within a week or 10 days.
Bordeaux comes second where it's 20 days or so within a month.
And Burgundy sometimes can sit there a little bit, but you do actually get that
price, that appreciation or margin out of it. But it just sometimes it does
take a little bit longer to sell.
And then with Italians, depends on which specific type, which specific producers.
(19:54):
And it can also go very fast and it's hot in demand.
Now, again, that was last year. And this year, overall, I think the market is
people are a lot more cautious, right?
Spending wise for everything, not just wine. So I think it does,
at different times, and with the overall macro economic backdrop,
it does actually impact how quickly the wines sell in the secondary market.
(20:18):
And it also depends what wine it is and what vintage it is.
Yeah. So there's a lot of factors that come in, but it could be as quick as
in the weeks or months to actually shift it.
But overall, that's interesting. I picked up there that you mentioned there
isn't one centralized place to sell. Is that something that's on your goal for
(20:39):
the platform to create an exchange for wine?
That's a great question. No, right now we're very much focused on lending and
lending activities. But yeah, I think it's, you know, it's very interesting.
UK is actually one of the capital countries for wine trade, as we learned when
we start embarking on this journey of doing wine lending.
(21:00):
And it's just the secondary market is very active, certainly the case in every country.
And the reason why it can't be done is because the infrastructure behind it, right?
The warehouse, the bounded warehouse structure, and really just a very active
one merchant market and industry in general.
So I think it does actually provide what we need in terms of in case of default,
(21:24):
be able to kind of go through these channels and to really sell.
So we actually partner with quite a few merchants in the market for that specific
reason and to be able to essentially, if we need to, we have channels available
for us to sell these loans.
Do you ever foresee allowing private investors to come onto your platform and
to be able to fulfill that loan?
(21:45):
Or do you think it will maintain within your group to fulfill those loans in the future?
No, we're actually welcome interested parties. So feel free to reach out and talk to us.
We started with the group because it makes sense where we have all the infrastructure
already in place and we can actually get the investment perspective.
(22:05):
Yeah, I think you'll be surprised. I think there'll probably be quite a fair
few people that are interested in investing.
As you mentioned before, the property investment side, the art side is really
sort of taken off. And I think that, you know, the next sort of space is looking
at wine and going down that route.
I think it's an interesting, it's interesting to see it in the same sort of
(22:29):
light as sort of collateral.
And for you, I suppose you're physically holding, you're physically holding
that wine and storage whilst that loan is active. Is that right?
Yeah. If you don't mind, let me spend a quick 30 seconds explaining the process.
So essentially, for anyone who's interested in our service can go onto our website
and then just import in your wine collection.
(22:50):
And what we'll do is we show the current market value right away.
And then we do, if you're interested in submitting a loan application,
we will then go through our LTV calculation algorithms to essentially tell you
for that specific bottle, what is the LTV ratio we can offer.
And if the client is interested, what we ask is the borrower to,
(23:11):
potential borrower, to ship their wine into Coda Revolve, our warehouse,
which is state of our facility for wine storage specifically.
And then that's when we do the physical inspection of the bottle.
So we take 360 high-res photos and we have our staff there physically inspect
the bottle and document any conditions potentially on the bottle.
(23:33):
And then based on all the information, we do a final quotation for the loan.
And that's when we set the final LTV.
I find it very interesting. I think it's very exciting.
And I think you'll be surprised if you did open it up to private investors to
come on and be a part of that journey.
(23:54):
I think that there's different risks in investing into certain properties,
especially from a lending side. I think that goes without a given.
From a property side, if you're lending against that and
the development doesn't go well you know there's issues on that
side what sort of risks do you have
(24:14):
in and lending against those wine
is it is it reduced i suppose the storage facility would be in risk if something
happened to the storage facility where the where the where the wine was kept
is there any is there any other big risks like that or is it insured in that
respect because i suppose you could insure it yeah it is yeah exactly so warehouse
definitely is one but it It is fully insured.
(24:36):
And then the other part I think is really, in my mind, is it's really the prominence of the wine, right?
And that's why we check with the borrower in terms of where did they purchased
it and has it always been inbound or is duty paid.
If it's duty paid, it means it's probably left the bonded warehouse.
And we do actually have to do additional inspections and also do lower the LTV
(24:59):
for the potential risk. So we try to incorporate all these potential risks into
the LTV algorithm calculations.
And the other part is really just be able to stay to your point,
stay up to keep up with the market directions and trends and prices.
Since we start till now, the market has actually gone through quite a bit of changes, right?
From really the wines appreciating quite a bit to going through adjustment cycle from being able to,
(25:25):
said, my market trading be very active. So now a little bit,
I wouldn't say it's still there. The activity transaction is still happening,
but it's probably slower.
And people's preference shift, right? A lot of people, when I started looking
into it, it's because Burgundy and Champagnes are doing so well.
But now everyone's like, well, Burgundy's might be a little bit too rich for us to purchase.
And people start looking at this year's Bordeaux on Premier seems to do pretty well.
(25:49):
And Italians picking up popularities. So the market is constantly changing.
And I think for us to really that our job is to make sure we keep up with it
and continue with the pricing analysis and understanding where the market is
going and understanding very the overall the trends and the new regions that
people are interested in so we can add to our list and do a better job with our LTV evaluations.
(26:14):
Have you ever thought of maybe on your platform allowing individuals to,
you know, actually purchase into set wines or, you know, using your 360 approach,
you know, if you've got something that you can say actually over the next five
to 10 years, we anticipate this would appreciate by X, Y, and Zed have private
(26:34):
investors to buy a slice of, you know, fractional ownership of that, of that wine.
Have you ever sort of going down that route and open up the doorways down there?
That's a great idea, actually. No, that's a great idea. And I think it makes a lot of sense, right?
Especially now we have actually accumulated quite a bit of collateral.
(26:56):
But so far, thank goodness, our borrowers have been very pumped with their payments
and everything. And we don't see any risk for default.
But in the future, I can see that for borrowers, potentially not even default
situation, but they simply just actually, as they go through the loan terms
and they realize, well, actually, I'm okay for selling this one.
Wine and they want to release some of the wine as collaterals to
(27:18):
to the market and actually use the proceeds from
selling the wine to pay down the loan that's totally fine with us
as well and then we can actually open up as you said
to the public if they're interested in purchasing it no
that that's a great idea we probably will definitely look.
Into it they're taking some notes here
yeah exactly getting some ideas thank you
(27:39):
well yeah i would like i said it's
been amazing talking to you i don't want to keep you too long but i think
you know from from my side it'd be great to be updated
with how the journey goes maybe get you
on the podcast in the future as well and just
to find out how how these different areas develop and how
the market develops because you know once you
(28:00):
start getting into that side of you know you've got a great loan book
at the moment and it's growing and there's interest there and i
think opening up to the public to be able to you know
use your expertise to actually go do you know what here's a
great investment for buying into this and
based off of all of this research that you've already done because if you're
looking at that from a an ltv point of view the information and research is
(28:22):
already there isn't it so it's like you know presenting that and offering the
ability for people like me who's not so savvy on wine but loving i love investing
into property i love investing into.
You know bridging and that sort of finance as well as the stock market and a
lot that a lot of the listeners and audience from this do the same thing they
(28:43):
love investing into these things so if there was a an opportunity to be involved
in that i think people would be rather excited,
to to get involved for sure yeah thank
you so much now looking forward to anyone interested feel
free to reach out to us we would love to see you know
what we can do and then also thank you you for the
invite for i'd love to actually keep you up to date and
(29:05):
perhaps update you and the audience later on our
journey for now now we're officially launched so we'll be yeah definitely excited
and to share our journey with everyone yeah and where would be the best place
for listeners to come learn more about your business yeah great question so
um can you can visit us on at gerawine.com.
(29:26):
That's J-E-R-A-W-I-N-E.com. And also you can reach us through LinkedIn.
So feel free to drop a message both on the website or through LinkedIn.
And we have a team monitor that all the time.
And so love to talk to anyone who's interested either in the service or interested in an investment.
Awesome. Thank you so much for coming on. I really appreciate it.
(29:48):
Thank you. Thank you so much.
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