TOC Property Backed Lending Trust PLC (PBLT) were delighted to be able to share an update and further details of their ongoing positive performance with Tier One Capital clients this week.
PBLT has concluded three transactions recently totalling almost £6m of new funding for residential development projects in Middleton St. George near Darlington, Paisley and Glasgow. The development in Darlington is for 61 modern family homes being delivered by an experienced management team at Calmont Group, which is also supported by leading private equity fund manager Maven Capital Partners LLP (Maven). The transaction in Paisley is to support the development of 31 residential apartments and three commercial units working with experienced developers in the region. The project in Glasgow is a bridging facility for a strategic piece of land in prime Glasgow which is currently going through the planning process.
All three projects reflect the new strategy supported by shareholders in March 2021 and emphasise the refreshed approach for PBLT of working with strong, credible and experienced property development teams who are equally prepared to inject their own capital into the projects.
The pipeline for the remainder of 2021 remains very encouraging with over almost £8m of new deals currently being worked on, all in the North East of England, and further announcements will follow.
The first dividend under PBLT’s new investment strategy of 1p per share was paid to investors on 30 June 2021 – this successfully launches PBLT’s intention to provide shareholders with a consistent dividend payable on a quarterly basis. The current dividend yield sits at almost 5% and there may be an opportunity for PBLT to provide a further special dividend at the end of the year depending on future performance.
We are pleased to have been able to agree a new credit facility of £6.5m for PBLT from Shawbrook Bank (Shawbrook). This facility provides PBLT with further capital to support property developers, especially in the North East and Scotland, and a key priority of PBLT’s updated investment strategy is to enhance North East and Scottish housebuilders’ ability to meet government targets of building 300,000 new homes each year. Shawbrook has an established track record in providing loans to property developers and last month (June) announced that, since the launch of its development finance offering in 2016, it has provided £1bn of funding support across 230 individual projects, delivering 3,500 residential houses and flats, more than 600 commercial units and 1,000 student rooms.
It is great to see PBLT working alongside other established and credible finance providers.
The quality of the existing loan portfolio continues to strengthen as PBLT grows, new investments are made, and older legacy projects conclude. The key highlights include:
- Esh Homes – following the successful conclusion of this project and full repayment of capital in April 2021, PBLT was able to enjoy further investment returns through the profit share arrangement agreed at inception. The exact detail of this performance will be released in the interim accounts later this month.
- Bede and Cuthbert – this 30 unit residential property development on the banks of the River Tyne at Bill Quay has proved highly successful. All units are now either legally sold or reserved with the project forecasting to significantly outperform the initial appraisal. Alongside an annual interest return of 8%, PBLT also has an entitlement to 25.1% of the profits of this business due to its equity position in the company.
- Horizon – this Maven backed £3.8m facility, which commenced construction of a modern, sympathetic and environmentally friendly crematorium is now £1.4m drawn with construction on track to meet the target opening date during November 2021.
- Newlands – the borrowers acquired a strategic piece of land in the southern suburbs of Glasgow in September 2020 with PBLT providing bridging finance in return for an interest rate and a profit share. The borrower achieved planning in principle in February 2021 and have contracted to sell the land in early July for a price above appraisal.
- West Auckland – this long running legacy project concluded the sale of a large area of land accelerating the planned return of capital to investors. This is an improved position to that forecasted and has seen over £911,000 of capital returned to PBLT during June. While a capital loss is still expected, the level now anticipated is likely to be less than previously outlined.
Net Asset Value (NAV)
The NAV of PBLT continues to increase as the quality of borrower and investment opportunity improves, the running costs of the company are tightened, and the investment returns of the loan book stabilise. The support of shareholders during the last twelve months has allowed the team to ensure PBLT’s strategy is fit for purpose and pleasingly this is now being reflected in the regular increase in the fund’s NAV. We anticipate that this growth will continue as PBLT focuses on working with high performing and experienced property developers in the regions. As you may be aware, due to the investment trust structure of PBLT there is a requirement that 85% of income must be returned to shareholders by way of dividend – it is therefore important to consider the Total NAV Return over a set period to have a clearer understanding of the performance of the company. Total NAV Return includes both the value of the NAV and any dividends paid to shareholders.
Since inception in January 2017 PBLT has returned 20.5p per share to shareholders – this equates to a return of over 8% from inception, taking into account the drop in NAV at the beginning of 2020. We are now focused on achieving the consistent return of c.5% per annum in line with the updated investment policy.
The August 2020 NAV was 82.96p, which was an increase of 1.495% on the NAV at the end of May 2020. This increased to 83.93p at 30 November 2020 and increased further to 84.84p by the end of February 2021 representing growth of just over 1% during the three month period.