Information as per 31 March 2021 annual report
|Investment||Investment type||Carrying value||Income return||Property type / underlying security||Investment notes|
|Secured senior finance||First charge secured loans||£13.9m *||8.6%**||Diversified loan portfolio focussed on real estate investments and developments||Secured debt|
|Secured mezzanine finance||
Second charge secured loans
Diversified loan portfolio focussed on real estate investments and developments
Second charge secured debt and subordinated debt
* Including accrued interest/coupon at the balance sheet date
** The income returns for high return debt are the annualised actual finance income return over the period shown as a percentage of the average committed capital over the period
Despite a year that was characterised by significant uncertainty, the Company’s loan portfolio has proved to be relatively resilient. In terms of debt servicing, allowing for some temporary agreed extensions, interest and debt repayments have been received in accordance with the loan agreements. The growth of the loan portfolio remains a key investment objective for ART and is likely to attract a dominant weighting of capital allocated for new investments.
As at 31 March 2021, ART had committed £34.9 million across twenty three senior and mezzanine loan investments, of which £32.8 million was drawn. The loans are typically secured on real estate investment and development assets with attractive risk-adjusted income returns.
Overall activity and values in the UK housing market remained relatively resilient during the financial year, with notable demand pick up and value increases witnessed in some sectors. Continued low interest rates and competitive mortgage availability, coupled with ongoing Government support, particularly for first time buyers via the “Help to Buy” scheme, supports ongoing residential development, which bodes well for the Company’s lending ambitions.
Reflecting the strategic cautious approach to new lending temporarily adopted, the loan portfolio was characterised by net repayments during the financial year. Eighteen loans were fully repaid and four loans were partly repaid for total receipts of £17.8 million (including accrued interest and exit fees), resulting in a decrease in the loan portfolio by 17.8% over the period.
The largest individual loan in the portfolio as at 31 March 2021 is a senior loan of £4.0 million which represents 11.5% of committed capital and 3.2% of the Company’s NAV.
Post year end, three new loans were granted for £3.9 million, £0.7 million was drawn from previously committed loans and loan repayments of £2.9 million were received (including accrued interest and exit fees).
Portfolio loans are underwritten against value for investment loans or gross development value for development loans as relevant and collectively referred to as LTV in this report. The portfolio has an average LTV of 59.3% (with an average approved LTV between 54.8% and 76.9% for mezzanine loans whilst the highest approved LTV for senior loans is 72.9%).
As at 31 March 2021, 42.4% of the Company’s loan investments were senior loans and 57.6% were mezzanine loans, with a weighted average LTV ratio of 59.3% based on commitments, i.e. including amounts available for drawing. The underlying assets in the loan portfolio as at 31 March 2021 had geographic diversification with a London and South East focus. The South of England (including London) accounted for 67%, of which London accounted for 38%, of the committed capital within the loan investment portfolio.
To date, the Company has experienced no defaults, but the underlying loan portfolio continues to be closely monitored especially considering the Covid-19 pandemic and its potential impact on construction timelines and sales periods. Where it is considered appropriate, on a case-by-case basis, underlying loan terms may be extended or varied.
Considering the Covid-19 impact on the current economic environment, the Group has carried out a stress test of its total Expected Credit Loss (‘ECL’) analysis and, in consideration of the main qualities of its secured loan portfolio, the underlying loans’ LTVs, the number of loans where development is advanced and the number of seasoned facilities, the resulting total ECL was immaterial.