Specialist commercial property lender Business Lending Ltd is to launch a new commercial credit fund aimed at providing stable and secure income to institutional investors.
The company has appointed corporate finance specialists, Brandenburg Securities, to structure and distribute the fund, with the aim of generating investment returns of around 250 basis points over 3 month Libor to investors. Business Lending says it aims to ensure only the highest quality secure assets are chosen for the fund.
Stuart Parfitt, managing director and founding shareholder of the firm, says the recent constraints in the banking market have allowed it to bring forward plans for the fund launch.
"We developed the idea for a secure credit fund almost three years ago but the property lending market was too hot to enable us to deliver good quality returns to investors within the levels of capital security we would be comfortable promoting.
"Events of the last 16 months and particularly the international banking crises since September 2008 have reversed this, and the opportunity has ripened," he explains.
Parfitt highlights that the commercial property market values are now down by over a third, making the market look attractive again for investors.
He concludes: "There remains some downside risk that values could deteriorate a little further but as a senior lender we limit investors' exposure to this whilst they continue to benefit from stable cash-flow."
Commenting on the launch, William Brooks, managing director of Brandenburg Securities, says: "We have initially targeted investors with a direct exposure to UK commercial property, who know and understand the dynamics of that market, but are perhaps cautious about increasing exposure at this time.
"By investing in a credit fund with a transparent structure, investors will be able to see and assess the underlying commercial property proposition but benefit from the downside protection of having a borrower with an equity cushion of 25-30% of the value of the property. However subscribers will still benefit from an interest coupon of around 250 basis points above Libor."IFAonline
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