Investor Confidence

Update on the Brexit vote and the property market



The Brexit vote has dominated the headlines in the last three weeks and had a significant effect on a number of asset classes. The effects on the FTSE 100, FTSE 250, other stock markets, bond yields, sterling, and real estate have been widely reported.



Even cash is being impacted with the fall in sterling expected to increase inflation and reduce the real (post inflation) returns.



Most pertinently for Saving Stream and Saving Stream investors there have been some concerns voiced about potential effects on the UK property markets. For example, it has been suggested that a reduction in overseas investment in UK real estate is possible, or that if the economy slows down landlords will be in a weaker bargaining position in negotiating rents.



As ever these challenges, if they occur, also present opportunities for well-placed and disciplined investors and lenders. We believe Saving Stream and its clients are extremely well placed to take advantage of the disruption that has inevitably come with the result of the vote.



For instance, if there is a reduction in overall lending into the property markets that should see lenders achieve better yields on new loans that they make.



Our view is now is the time to be selectively picking up good deals at more attractive prices. As a lender we are a strong position to do that. Having low overheads ourselves (for example we own our own headquarters building) we are in no rush to get deals out to the market but we will be picking the best from the pipeline on improved terms.



Where loans are currently going through our due diligence process we are renegotiating LTVs in order to ensure that risk levels are further reduced. We already cap our loans at a sensible LTV of 70% but we will be offering LTVs on new loans close to 60% to give a more generous equity cushion just in case there is a hard landing.



Our cash position is similarly strong. We have significant cash reserves on hand in addition to the £2.5 million provision fund we maintain at all times. As such we have no need to originate loans just to generate cash flow and our rigid quality controls on lending remain firmly in place. As ever, underwriting discipline is essential no matter what the economic environment. A bad deal is a bad deal no matter what yield we are obtaining.



When the recovery in the market comes it can move remarkably quickly. For example, from Q1 2010 to the end of Q2 2010, even as the economy stagnated, office rents in the City of London jumped by 25%. That was the strongest six months of rental growth since reliable records began in 1988.



The advantage with lending through Saving Stream is that as creditors we are taking much lower risks than the equity investors in property and with that lower risk profile we can be confident of using the recent shock of the Brexit vote to position our clients in higher quality and higher yielding opportunities.



Kind regards,



The Saving Stream Team

Thanks very much, Liz. Some good sense there.

I would be interested in your view and that of others on the board. I'm a charity trustee and thinking of diversifying some of our endowment fund into P2P. We would choose 2-3 platforms and diversify loan types. Saving Stream is on the shortlist and I've invested a token amount personally to get familiar with the system.

Looking at the accounts for Lendy at beta.companieshouse.gov.uk/company/08244913/filing-history is not very illuminating. The last accounts were to 31 December 2014 and lots has happened since. At that time, Lendy had share capital of £1 and net assets of £270K. It's true that there was over £3m of cash on the balance sheet, which is comforting.

On the one hand, these words from the latest update are sensible and inspire a degree of confidence: "Our cash position is similarly strong. We have significant cash reserves on hand in addition to the £2.5 million provision fund we maintain at all times. As such we have no need to originate loans just to generate cash flow and our rigid quality controls on lending remain firmly in place. As ever, underwriting discipline is essential no matter what the economic environment. A bad deal is a bad deal no matter what yield we are obtaining." On the other hand, the UK is now vulnerable to an overseas buyer's strike which could have unexpected impacts on the property market. It is just these kinds of external shocks that can cause problems with several loans at once and overwhelm the provision fund.

So my question is, does the community here have any thoughts on the robustness of Lendy Ltd beyond what can be gleaned from the 2014 accounts? Do we know the track record of the directors and whether the team has been strengthened since the early days reported on here p2pindependentforum.com/thread/233/lendy-business-model? Has anyone seen the "back up servicing arrangement" that is in place in the event of insolvency and do we know who the counterparty is to that agreement?

Many thanks in advance.

Certainly I will - but it's always good to get independent feedback, especially from such a knowledgeable community as this.