Fitzrovia Finance completes new £3.1m real estate investment loan yielding 5.25%

Posted July 10, 2019

ALL ARTICLEs

Fitzrovia Finance completes new £3.1m real estate investment loan yielding 5.25%

Fitzrovia Finance’s latest loan, which has a headline Interest Rate of 5.25 per cent for investors is one such example. The £3,090,000 loan, which closed in June, is helping fund a residential property development project in Whitechapel, London E1. The development will provide a mix of eight residential units and one commercial unit.

The property investment platform has seen its latest loan help fund a project in East London.

Savvy income-hungry investors have recently been looking increasingly at assets in private markets such as secured property lending and development finance. 

For those interested in exposure to real estate investing one option is buying Real Estate Investment Trusts (REITs), but for those wanting a purely income-producing asset that does not target capital growth, debt investment platforms such as Fitzrovia Finance are on offer.

Since it opened for business with institutional investors in 2017, Fitzrovia has facilitated £120m of loans to property developers across the United Kingdom to help fund property projects.

Fitzrovia Finance’s latest loan, which has a headline Interest Rate of 5.25 per cent for investors is one such example. The £3,090,000 loan, which closed in June, is helping fund a residential property development project in Whitechapel, London E1. The development will provide a mix of eight residential units and one commercial unit.

The loan is supported by the East London market which is showing a steady increase in house prices. According to a survey from Foxtons, the average sold price in East London has increased by 3.68%.

The loan, which will allow the borrower to develop the property for onward sale has a loan-to-value (LTV) of 61.80 per cent. Here’s a quick recap of what that means. The LTV is calculated as the loan amount divided by the value (or GDV) of the property development when complete. For example, with a 65 per cent LTV, a property is valued at one and a half times as much as the loan.

This means that the owner would only need to sell two-thirds of the properties or two-thirds of its market value to repay the loan. In weaker markets, when values may fall, this is very important. In order to sell, you may have to accept a discounted price. The lower the LTV the more the debt investment is likely to be secure.

Therefore, Fitzrovia Finance has attributed this loan to an A risk band.

The loan for the development of the freehold property has a term of 18 months. After this, the full loan and accrued interest is set to be repaid. This type of loan is known as a bullet loan rather than an amortising loan which is paid off in regular intervals i.e. monthly.

As with all loans that make it onto the Fitzrovia Finance platform, the borrower has been through a rigorous process to target as much capital preservation to the investor as possible.

The loan has first charge security in the event of default meaning that investors have first priority to recover the debt. An additional layer of security is provided in the form of a third-party personal guarantee for £825,000. The documentation for this loan was completed by London law firm Howard Kennedy and the valuation provided by Aitchison Raffety.