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Income: how Walker Crips' landmark bridging finance fund aims to hit 8.4%
by James Phillipps on Aug 08, 2013 at 11:15
Walker Crips’ bridging finance fund launches this week targeting an 8.4% annual yield and the company has vowed to pay the fund's running costs if after income is paid to investors, the income it receives for running the fund is insufficient to cover the expenses.
James Allen, the manager of the Walker Crips Income Short Term Lending fund, said the vehicle is the first regulated bridging finance investment fund to be launched in the UK, although it was no mean feat bringing it to market.
‘I started looking into the possibility of getting the fund regulated in this sector almost two years ago and the conversations with T Bailey, the authorised corporate director (ACD) and NatWest, the depositary, started 18 months ago,’ he said.
‘Over that period of time, the three of us worked together to discuss the steps required and the checks and balances that needed to be in place to satisfy the Financial Conduct Authority from both a risk and an operational point of view.’
Auction buyers a key market
The fund will look to achieve its 8.4% annual yield through providing bridging finance to borrowers who are looking for short-term funding for UK residential property acquisitions or conversions, many of which have been bought at auction.
‘When people buy at auction they need to settle in 28 days and you won’t find bank lenders that can satisfy that,’ Allen said.
‘A lot of other lenders are struggling to raise capital and provide short-term finance for property professionals.’
Walker Crips will use three bridging finance companies – Bridgebank Capital, Mayfair Bridging and Century Capital – to source loans and Allen said using multiple lenders will mitigate risk and provide geographic diversification. Although the split of the credit facilities provided to the three companies can be tweaked, the maximum amount of loans sourced through any single firm will be capped at 50% of the portfolio.
‘Borrowers go through the underwriting process with the lender and then I will review it with respect to the loan book of the lender and the overall loan book of the portfolio,’ Allen said.
‘If I am happy with it, the money will be paid to the lender’s solicitor and the first charge on the property will be paid to the fund.’
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