This article is from the Australian Property Journal archive
COMMERCIAL real estate debt group Balmain Investment Management has teamed up with Brookvine Pty Ltd to launch a new secured private debt fund seeking to raise up to $250 million.
Balmain executive director Michael Holm said the joint venture partners are taking advantage of the significant reduction in risks and increase in margins in the commercial property lending market post GFC, due to increased regulation, global capital constraints and past over-lending to this sector pre GFC as well as the huge reduction in lenders and the major banks’ shift away from commercial property lending.
The new Secured Private Debt Fund will specialise in the $10 – $20 million commercial loans market, where returns are higher, portfolios are more diversified and risks easier to manage compared to larger value commercial property loans.
“Secured private debt secured against commercial property is an enormous asset class in Australia and the underlying security is well understood by the investment community.
“The effect of Basel I & II combined with APRA regulations make it much more difficult for the banks to lend beyond three years in non-residential sectors. Together with global capital constraints this means the supply of capital is inadequate to meet borrower demand. The lack of supply is resulting in greater returns. Combined with de-risked capital values and higher debt service coverage, the returns relative to risk are very attractive on new lending,” Holm said. “Lending margins are now two or three times higher than before the global financial crisis with risk levels the lowest in decades.”
Property Review
