British Pearl has canvassed investors for their views on funding a new portfolio of homes developed in partnership with local councils in London.
The proposition is that British Pearl and a developer will create good quality, refurbished houses, and flats for rental to the homeless in the capital.
“We have been in discussions to form an investment relationship with a developer who has a 25-year track record supplying rental properties to the NHS and local authorities,” Ali Celiker, chief executive of British Pearl, said.
“The London boroughs commit to a lease period of between three to five years with a very high likelihood of renewal.
“This would provide investors with a unique opportunity to receive rental income, ultimately funded by central government with indexation, while also making a tangible social impact through providing homeless families with affordable, fit-for-purpose homes.
“The day-to-day management of tenants and properties would be provided through a joint venture with one the largest boroughs in London.”
It would be a new line of investment for the platform, which is close to completing the sale of its £3m portfolio.
“We wanted to exit the property portfolio last year as we were nervous about the solvency of the special purpose vehicle and tenant rental payments,” Celiker said.
“There will be major changes to the economy as soon as these government support schemes end.
“When you have a business model like ours, unlike an individual who can fund their portfolio through a period, investment platforms have a fixed term.
“The tenant would be the local authority in the portfolio we are now looking at. We prefer portfolios with quasi-government backing in this market environment where risk to rental income is real.”
“The current portfolio will sell imminently and only our share investors will be hit with a loss as a result of transaction costs in and out and leverage. Loan investors already have all their interest payments back and will receive all their capital.”
It comes as British Pearl’s 2019 annual accounts showed its profit and loss account fell deeper into the red from £4.8m to £5.2m during 2019.
“I spent 12 years in capital markets before setting up a fintech business. I am always keen to get to profitability as soon as possible,” he said.
“We anticipated building a larger portfolio but have been hit with so many external uncertainties that we took our time, we had the Conservative Party leadership change, Brexit and an election throughout 2019.
“Our plans in 2020 were to grow the portfolio and then we had Covid which completely changed the landscape.
“You only start entering profitability when the portfolio generates sufficient fees to cover costs, we haven’t got to that point.
“It’s important to keep your pulse on the solvency of the business.”
The platform was launched in July 2018 with financial backing from former Conservative Party treasurer Lord Fink.