As bond yields grind ever lower, we haven’t seen much activity in the retail bond space apart from a few small fundraises. That dry spell looks about to be broken with the announcement that UK listed property finance firm Urban Exposure is seeking to raise money from a retail bond.
Urban Exposure only recently launched on the London market but its clearly gearing up to grow the business, especially its asset management business. According to Urban Exposure, the bonds are “being issued to originate loans to UK real estate developers which fulfill certain eligibility criteria – as described in the base prospectus available for viewing here: https://urbanexposureplc.com/investors/retail-bond/.
- The bonds are available to retail investors
- The bonds will bear a fixed rate of interest of 6.5% per annum
- Interest will be payable semi-annually in arrear in equal instalments
- The bonds will be guaranteed by Urban Exposure PLC
- The bonds will be due to mature on 6 August 2026
Investors Chronicle ran a good background note on Urban Exposure which is available through this link HERE.
Mark Glowrey at City and Continental has helpfully put together a table of how this new bond compares with other peers in the sector including Lendinvest.
|Bond||Price (mid)||Yield||G Spread||Notes|
|Jerrold Finco 6.25% 2021||101.289||4.87%||G+434||BB-. Secured.|
|LendInvest 5.25% 2022||100.175||5.19%||G+473||Secured, topco gntee, bridging loans. Retail-eligible.|
|LendInvest 5.375% 2023||100.375||5.27%||G+480||Secured, topco gntee, bridging loans. Retail-eligible|
|Jerrold Finco 6.125% 2024||100.84||5.58%||G+508||BB-. Secured.|
|Shawbrook 8.5% 2025||104.38||4.87 %
|G+434||T2 bank issuance. Callable Oct 2020|
|Urban Exposure 6.5% 2026||100||6.5%||G+593||New Issue, retail eligible. Development loans.|
My own take is that I still have a (slight) preference for the Lendinvest paper which is shorter-dated, with durations through to 2022 and 2023. I am a little edgy about exposure for seven years. For that duration, I’d probably have preferred a yield closer to, or above, 7% per annum.
I’m also ever so slightly worried about the residential development market. It strikes me that we are at an awkward point in the cycle and times might be tough. That said Urban Exposure seems focused on lending for £10m or more and tends to like smaller building firms to lend to. That is the safer end of the spectrum.
It’s also worth noting that the retail bond is based on a group subsidiary – as with Lendinvest – not on the main listed topco. That said there is a guarantee on that debt from topco which doesn’t hold much principal debt from memory. I also tend to think that the topco’s shares are a little undervalued.