July 31, 2018

Welcome to our second quarter newsletter

The property market in the UK continues to show signs of slowing down, especially on the high end. The question now is whether Brexit and the gradual withdrawal of easy-money policies around the globe will turn the current stumble into something worse. Thankfully, the focus of the fund is primarily on less expensive properties, which haven’t been hit as badly. 

Since 1973, the year Britain joined the European Union, the average London home price climbed from just under 13,000 pounds to about 474,000 pounds—a 36-fold increase, according to Nationwide, the U.K.’s largest building society. The last big reversal occurred during the financial crisis when prices dropped about 20 percent. Since bottoming out in 2009, they’ve nearly doubled. The declines this time have been modest. London recorded its first annual decrease in prices in more than eight years in February, a drop of 0.1 percent, revised government data published showed. 

Changes the government made over the past few years to deter property speculators could also weigh. The reforms included an increase in sales taxes on second-home purchases and changes in the tax relief for mortgage interest on rental homes. One popular initiative that’s helped support the property market, the government’s “Help to Buy” loan plan, is slated to end in 2021 unless it’s extended again. And looming over everything is the potential impact of Britain’s withdrawal from the European Union. 

The fund had another strong quarter returning 2.6% for an annualized return of 10.4%. The reason for the good performance is that we were almost fully invested for most of the quarter. We are also pleased to announce that we have been offered terms for a new credit facility for the fund itself. The credit facility will be provided by a publicly listed company and will be made public in the next few weeks. This is great news as it will allow us to a) be more competitive when pricing loans and b) allow us the flexibility to grow our loan book much faster. 

The other news is that Christopher Khoi will be joining Whitehall Capital as a Partner. Christopher has over 7 years of experience in real estate finance. Before founding RCP finance a debt advisory platform, Christopher was at Aeriance Investment (part of Aerium a $6.5bn European RE fund), an independent multi-strategy and multi-product Debt Fund. He has closed around £450 million in loans in the UK market. We wish Chris the best of luck in his new role.