Bass Capital returns over 13pc as private lending continues to grow
Private financier Bass Capital has returned an average 13.2 per cent on property and construction senior lending over the past four years proving there was depth in the property private lending market with room for double-digit returns.
Backed by over 100 high-net-worth investors, Bass said keeping its funds wholesale, instead of listing publicly, was one way to achieve higher returns, as was searching for better returns from deals that have “fallen through the banking cracks”.
As an example, one of Bass’ deals was a first mortgage construction loan for a 16-townhouse project in Girraween, a growing suburb in the west of Sydney, on a 70 per cent loan-to-value ratio. The deal had 80 per cent pre-sales from buyers wanting to be close to a good high school.
“We are not taking any more risk than other private lenders. We have completed over 22 deals with no loss making or non-accrual investments,” Bass Capital director Giles Borten said.
“Bass Capital’s strategy has been specifically to target deals where there is less competition in the market and this has allowed us to get better risk adjusted returns.”
The group could extract a higher return through assisting borrowers with more “complex situations” from which many lenders have fled, Bass Capital director Nick Goh added.
“For many developers with expensive holding costs our ability to deliver quickly is a key competitive advantage,” he said.
The group specialised in secured senior or first mortgage loans to developers in the $5 to $30 million range, an area it considered most impacted by the withdrawal of bank lending in 2015-16.
Mr Borten said private lending would continue to flourish even despite the major banks making a slow return to commercial lending following an improvement in the housing market adding the group was looking to grow 50 per cent this financial year.
In a private lending panel held by Australia China Business Council last week, lending groups like Balmain, White & Partners – run by the Ray White family – and Wealth Pi Fund all saw continued growth in this sector.
But after the height of 2015-16, when banks first retreated, returns have become more modest with most lenders returning 7 to 9 per cent rather than double digit numbers.
Wealth Pi Fund’s recent research on 23 commercial real estate loan funds showed the average return of the first mortgage loans was 6.98 per cent, net of fees and the average Loan to Valuation Ratio was 66.71 per cent.
