Real Estate

EXCLUSIVE: LendInvest Capital Eyes Further Strong Growth

Tom Burroughes Group Editor London 20 March 2017

EXCLUSIVE: LendInvest Capital Eyes Further Strong Growth

This publication recently spoke to the firm about its business in the real estate lending space, which has been disrupted in the years since the financial crisis.

LendInvest Capital, the fund management and advisory arm of UK-based online real estate lender LendInvest, expects further growth in its business after strong expansion over the past year.

The organisation also expects to ramp up the number of its staff, although perhaps not as fast as the growth rate over the past 12 months or so, executives told this publication.

LendInvest’s rise is part of a trend of alternative, non-bank providers of finance, covering areas such as property and commerce, filling the gaps in credit left by banks unable or unwilling to play the role they once had before the 2008 financial crisis.

Founded in 2008, the firm - originally known as Montello, which became one of the UK’s most active short-term lenders in the aftermath of the crash – said that individuals and institutions have used its platform, discretionary funds and committed credit lines to invest almost £1 billion in loans to borrowers who have bought, built or renovated over 2,700 properties worth in excess of £1.4 billion (about $1.7 billion) in 120 UK towns and cities.

Some two years ago, LendInvest had about 30 staff; this has grown to 107, Rod Lockhart, managing director, LendInvest Capital, told this news service in a call. “We continue to grow the amount of lending we are providing,” he said, adding that the firm’s capital base and assets are rising continually.

The firm is positive about areas such as the UK’s buy-to-let sector, which for years had been the preserve of banks. “We feel there is room there for alternative lenders to be competitive,” Lockhart said.

Most of the firm’s borrowers are corporates rather than individuals, he said, such as in the small- and medium-sized category. Lockhart thinks that buy-to-let is a sector that is becoming increasingly professionalised and such a trend “plays into our hands”, he said. (The buy-to-let market has been hit in some respects by moves by the current government to squeeze tax reliefs and hike stamp duty transaction taxes on this space.)

LendInvest Capital manages assets for institutional investors, banks, family offices and private clients. The organisation is regulated by the Financial Conduct Authority as a fund manager.

A "nice problem" for the firm is being able to originate enough loans to keep up with demand from investors to write deals, Lockhart said. "We are not seeing a huge amount of competition with other lenders in the space we are in," he said.

Lockhart said he hoped to increase loan origination "significantly" this year.

Is there any compression on fees and interest rates in the space? "In some areas, such as bridging loans, we have seen a bit of compression. Some of the compression is driven by challenger banks and the cost of capital here is relatively low," he said.

"When we lend, we use bank funding to be competitive. We have funded loans with funding lines committed by investors including Macquarie, a UK challenger bank and a European infrastructure fund," he said.

The fund
Asked about LendInvest's Real Estate Opportunity Fund, launched in 2014, Lockhart said lending via the fund can be achieved far more quickly than is typically available from a bank. While some types of loans can take months for a bank, LendInvest can get such a loan sorted out in a fortnight, he said.

The fund offers target returns of 6 to 10 per cent, he said. In 2016, returns came out at 8.25 per cent and were just above 9 per cent in the previous year. The fact that the fund was able to clock up such a result for 2016, a year that the saw the dislocation of the Brexit vote and consequent impact on real estate, will be encouraging to the LendInvest Capital team.

The fund operates in real estate loans in the £1 million to £5 million bracket. It is domiciled in Luxembourg and carries a minimum investment commitment period of one month (if this is broken there are financial penalties).

The firm is also looking to extend lending around development projects, Lockhart said. It is clear that, as far as this organisation is concerned, even if there is some return to "normality" in banking in the years ahead after a period of immense change, specialist lenders and investors are unlikely to walk off the stage. 

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