British Pearl has suspended interest payments to investors and is preparing its current property portfolio for sale on the open market.
The property investment platform is still operational but its chief executive Ali Celiker told Peer2Peer Finance News that action had to be taken due to risks from the coronavirus outbreak to the solvency of the special purpose vehicles (SPVs) that own the loan assets.
“Rising unemployment and a complete ban on evictions and additional protections for renters has increased the risk to rental income receipts, as a result interest and dividend distributions have been paused to help SPVs meet their expense obligations and protect their future solvency,” Celiker said.
“Unpaid distributions will continue to accrue and will be distributed at a later date.”
Celiker added that payments to British Pearl investors have never been missed and rental payments are up to date.
“We fear this position could very quickly change as the virus continues to spread and the lockdown continues, which would risk the solvency of the SPVs, “ he said.
Celiker said the situation and strategy will be monitored but the suspension will continue “for as long as there is a risk to SPV liquidity resulting from uncertain rental receipts.”
Additionally, the platform has prepared its portfolio for sale on the open market, which Celiker said was always part of its investment exit strategy and needed to be done now to preserve values.
“In the ideal case we exit investments when we are able to lock in profits for our customers and unfortunately in other cases, we will need to exit investments where there may be a loss,” he said.
“When we are evaluating investments, we consider the cashflows they generate from rental income and their capital or sale value.
“Currently the average duration of our investment portfolio is two and a half years, it is our opinion that there is a high probability that over this period the economy and the property market could deteriorate further.
“In short, there is very high downside risk hence our decision to start marketing the portfolio now.”
No offers have been accepted and the platform has a reserve price in mind.
The platform was launched in July 2018 with financial backing from former Conservative Party treasurer Lord Fink.