A specialist commercial property lender providing funds for limited recourse borrowing arrangements (LRBA) has called for their retention when they are used to purchase commercial property, claiming they are a safe vehicle in the hands of small to medium-sized enterprises (SME).
Thinktank chief executive Jonathan Street said the firm was asking the Labor Party to reconsider its proposal to abolish LRBAs, particularly as they apply to commercial property, as it found there were few problems with borrowers in that sector.
“While we readily acknowledge there have been some issues in the residential SMSF/LRBA area, which was in genuine need of tighter regulation, it’s our experience that LRBAs are proving a very important debt instrument that allow SMEs and self-employed owners the opportunity to dovetail their commercial and superannuation ambitions to very positive effect,” Street said.
“It’s worth noting that since December 2013, we have financed more than 300 commercial property secured LRBAs, with that part of the loan book currently standing at $165 million. Importantly, we have had practically zero arrears history – only one loan has ever defaulted in the wake of a cyclone – and 81 per cent are currently repaying principal and interest in alignment with their retirement targets.
“It’s proving an excellent, highly performing borrowing and wealth management option when in the hands of responsible, disciplined lenders and well-advised borrowers.”
Street made the comments as Thinktank passed the $1 billion mark in loans under management and he predicted that number would double by the end of 2021 as the group had grown its loan book by 35 per cent each year since 2013.
He predicted the growth would remain strong in a lending market where the government was encouraging people to consider alternative credit providers outside of the major banks.
While the lender drew funding from major domestic and offshore banks, as well as institutional investors, it had also launched two bond trusts aimed at the wholesale investment market, and particularly at SMSF trustees, he said.
“We have been pleasantly surprised at the interest shown in the two funds. The initial thought was that it would attract most investor attention in the wholesale market, but we are finding small institutions, such as family offices and fund of funds, are also investing,” he noted.
