Investment Opportunity
Australian
Secured Private Debt has the following characteristics:
- Capital stability
- An attractive net return over 90-day bank bills
- A predetermined, low volatility income stream
- An in-built inflation hedge
- Favourable market dynamics
- A large market with few competitors
…. and the underlying security is commercial property – an asset class well understood by investors.
The opportunity in Australian Secured Private Debt is particularly timely. The
margin over 90-day bank bills is 2 to 3 times higher than pre-2008, whilst
lending risk is substantially lower. The withdrawal of 2nd tier banks, foreign
banks and retail mortgage trusts has left the Big 4 Banks with 95% of the
market. In this low competition environment lenders enjoy improved risk-reward
characteristics through improved loan to valuation ratios and more
advantageous loan covenants. Furthermore the re-rating of commercial property
values has reduced capital risk and improved debt servicing capacity on new
loans. And with limited over-development,
stable vacancy rates, lower interest rates and higher property yields, the
economics for property borrowers remain attractive.
With its vertically integrated loan services platform – proprietary origination,
internal loan administration, dedicated credit and asset recovery teams, and
proven funds management – Balmain is uniquely positioned to take
advantage of this investment opportunity.