ICG-Longbow Senior Secured UK Property Debt Investments displays resilience

The UK real estate debt investor ICG-Longbow Senior Secured UK Property Debt Investments (LBOW) has reported interim results for the six months to 31 July 2020. At the period-end, the NAV amounted to £119.2m, which compares with £119.1m as at 31 January 2020.

Some of the key developments from the period include:

  • No losses incurred or impairment provisions required on any portfolio investments as at 25 September 2020; 
  • Profit after tax for the six month period to 31 July 2020 increased by 37% on prior year;
  • Dividend maintained at 1.5 pence per share per quarter for the six month period to 31 July 2020, fully covered from earnings; and 
  • Total loan commitments of £131.1 million as at 31 July 2020, with 16% of the portfolio representing ‘post-COVID’ investments.

Investors have been circumspect in spite of LBOW’s resilience

As at 31 July 2020, the group’s investment portfolio comprised 11 loans with an aggregate principal balance of £120.69m, representing 101.2% of the shareholders’ equity (31 January 2020: nine loans with an aggregate principal balance of £120.8m, representing 101.4% of the shareholders’ equity).

The portfolio has proven resilient so far, in light of the COVID-linked economic and market disruption. The fund’s chairman, Jack Perry, notes the following: “The board has been reassured by the performance of the company’s portfolio, which continues to show the resilience and defensive characteristics that the senior-only investment parameters were originally designed to provide. The company provided assistance in the form of covenant waivers and interest deferrals for certain of its borrowers to aid them in navigating the disruption caused by the pandemic.  However, in each case, the board believes the security position remains satisfactory, with no shortfall in capital or interest anticipated and no impairment provisions being required. 

The company delivered a fully-covered dividend during this period of uncertainty, while maintaining strong cash balances during the peak of the crisis and only concluding new investments when confident the time was right to capitalise on our available liquidity following adjustments to market pricing. Despite the overall resilience of the loan portfolio, the company’s share price has fallen to a material discount to NAV as a result of the wider market re-rating following the onset of COVID-19.

Looking forward, the key strategic challenge the company faces is to find a path to growth, which will provide greater diversification in its investment portfolio, a reduced expense ratio and improved liquidity in the company’s shares. Unfortunately, neither market conditions nor the share price have supported new share issuance in recent periods.

Of paramount importance in this period of uncertainty is maintaining the quality of the existing portfolio.  We will face ongoing challenges in the economy and the board is mindful of the so-called ‘second wave’ of COVID cases and the consequent effects of further local or national lockdowns on the investment portfolio and wider market conditions. The company continues to see a robust pipeline of opportunities to deploy capital at attractive returns and with strong security. We have no intention of investing aggressively as we can fulfil our mandate and achieve our investment objectives through attractive opportunities in sectors and locations where property fundamentals remain robust.”

About LBOW

LBOW’s objective is to construct a portfolio of UK real estate debt-related investments predominantly comprising loans secured by first-ranking fixed charges against commercial property investments, with the aim of providing shareholders with attractive, quarterly dividends, capital preservation and, over the longer term, a degree of capital appreciation.

LBOW: ICG-Longbow Senior Secured UK Property Debt Investments displays resilience

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