Specialist lender Urban Exposure PLC (LON:UEX) wants to raise about £50mln from a bond offer that closes next week says chief executive Randeesh Sandhu.
The bond is the first tranche of a £500mln programme and will build its profile among retail investors as well as helping to fund its growth plans.
It will not be covered by the FCA’s financial compensation scheme nor will it be credit-rated, but there is a double protection for investors of a first charge on the developers’ properties and a guarantee from Urban Exposure the PLC.
A hard ceiling of 75% on the loan to gross development value is another comfort buffer, says Sandhu.
The AIM-listed company lends to developers of flats and houses for first-time buyers and young professionals looking to move out of rented accommodation.
There is a huge unmet demand for the type of housing it finances, says Sandhu, with six million people in the UK who want to buy but can’t find a property in the area they live or work they can afford.
The Government’s housebuilding target is 300,000 homes each year, but only 50-70% of that number are being built currently.
Ten years track record
All loans are to developers with at least a ten- year track record and are predominately new build apartments in areas such as Birmingham, Leeds and Manchester.
Such is the need, he says, that new developments are between 40-80% pre-sold.
Urban Exposure’s niche of the market is very technical, Sandhu adds.
“We structure our loans very carefully and lend to the best in the industry.”
Since the company was established in 2002, there have been no defaults on any of its advances to developers.
Bond investors will get a 6.5% coupon with the interest paid twice a year in arrear.
The bonds mature in 2026 though they will be listed on the LSE’s retail bond market to give some liquidity.
There is a minimum investment of £2,000 and multiples of £100 thereafter.
Urban Exposure itself listed on AIM just over a year ago and the shares currently trade at 52.5p.
That compares to an estimated NAV of 90p from broker Liberum, while the company has forecast a 5p dividend for the current year.
Lending to continue
Urban Exposure lent £525mln in 2018 but Sandhu sees that total rising to between £700-900mln in the current twelve months.
That will happen irrespective of the retail bond, he says, any proceeds of which have not been included in its funding estimates.
“We manage pools of capital and the retail bond is just one source.”