London-based private equity real estate firm Patron Capital has bought a portfolio of 941 shared equity mortgages with an outstanding balance of around £25 million from housebuilder Galliford Try, reports PERE's sister publication Real Estate Capital.
The portfolio, acquired by Patron Capital’s Fund IV, is secured against properties across 101 developments, mainly in the south of England. Galliford Try originated most of the loans between 2008 and 2013.
The portfolio will be managed by Optimum Credit, a second-charge mortgage lender, which is owned by Fund IV.
Shared equity mortgages are designed to help people who cannot afford to buy a property outright get onto the property ladder by allowing them to buy a share in a property, usually 25 percent to 75 percent
“Shared equity mortgages were popular during the window of limited mortgage lending from the banks post-recession,” said Keith Breslauer, managing director of Patron Capital.
“Now, as housebuilders increasingly focus their balance sheets on pure development, we see a significant opportunity to acquire and manage these loans via our Optimum Credit platform, and this deal represents an excellent potential return.”
Lloyds Bank Commercial Banking supported Galliford Try in the deal.
“It is a great example of the Bank’s ‘Helping Britain Prosper’ plan in action, in which we have committed to helping the UK housebuilding industry build more homes. This transaction has released more capital back into the sector to support this initiative,” said Mark Elliott, managing director at Lloyds’ capital markets.
More housebuilders are expected to sell the shared equity loans held on their balance sheets to raise funds for more development.
Greg Fitzgerald, executive chairman of Galliford Try, said: “We are delighted to have worked closely with the teams at Patron Capital and Lloyds Bank Commercial Banking to conclude the sale of our shared equity portfolio at balance sheet value, freeing cash to be invested in our development business and removing an unnecessary administrative burden.”