JSE listed Trematon Capital Investments Limited, the Western Cape focused actively managed Investment Holding Company, today announced that it has invested in the UK real estate market via ASK Partners (ASK), a boutique real estate private equity start up, based in London.
ASK operates in the private equity and lending space and specialises in sourcing funding solutions for residential and commercial developers in London. The executive team and founders of ASK have extensive experience in the origination and structuring of real estate debt and equity transactions. They have built relationships with many credible developers in London which have a short-term need for bridging or development finance.
The current state of the market for development lending in the UK has created an opportunity for non-bank primary and secondary lending to developers with excellent risk-adjusted returns.
Trematon Chief Executive, Arnold Shapiro commented: “This transaction marks our first investment offshore for several years. Following Brexit the real estate climate in the UK has presented us with a window of opportunity.
This investment meets our return criteria and provides currency diversification where we have existing skills from a local context.
Trematon now has direct access to deal flow in a very specific niche, as well as a platform to gain London specific property and due diligence expertise, creating an avenue for future investment.”
Trematon has made an initial equity contribution of £4.3 million. This represents a 40% shareholding in the Investment Company and an effective 20% shareholding in the Management Company. Trematon, has board and investment committee representation for both the Investment Company and the Management Company.
The total investment will be used to underwrite loans provided by ASK to developers at an interest rate that meets the risk criteria of each investment.
ASK, which is based and managed in the UK, has the responsibility of structuring the transactions, underwriting the loans and syndicating the investment.
To allow for the efficient recycling of capital, the loan transactions will be refinanced via a syndication process managed by ASK, whereby 90% of the loan value will be syndicated to high net worth individuals and 10% will be retained by the Investment Partners. Trematon will assist in syndicating loans to high net worth South African individuals, if required. Following syndication, the Investment Company will have generated a return in pound sterling terms in excess of Trematon’s minimum required return and the original investment will be recycled to finance future secured property loans and developments.
The fundamental decision to invest is based on the returns achievable in pound sterling and no depreciation in the rand is assumed, if the rand strengthens the returns may be more muted but over time the currency diversification should be positive for the group.