We hope you and your families are well during these challenging times.
As you’ll no doubt know, Coronavirus is causing unprecedented public health and economic challenges both in the UK and across the globe. For retail investors, impacts were first felt in the stock market, with the FTSE suffering its worst fall since 2008, and they are now extending to the UK property market.
The need for social distancing has led to a temporary ban on moving home, construction projects being put on hold, property financing arrangements being temporarily halted by lenders and even certain homeowners being given mortgage repayment breaks to enable them to get through this difficult time.
As a result of these unprecedented steps, much of the market has, in effect, paused and so the movement of money flowing around it has paused too.
How does this affect my Propio investment(s)?
1. We remain confident that investor capital will be repaid in full
Firstly, we’d like to assure you that, despite Coronavirus, we are confident in the strength of our property loan book and the quality of property assets that it is secured upon. Our portfolio has an average loan to value (LTV) of 59%. This means that the value of the properties within the portfolio would have to fall by over 30% on average in order for investor capital to be impacted. We therefore still expect the full repayment of all investor capital.
That said, to further protect investors during this time, our Investment Committee has taken the decision to maximise diversification, as far as possible, for all investments. This is to prevent any investor from being overexposed to any single underlying property loan within their investment bond or ISA.
2. It is likely that the end date of your investments will now be extended by 3-6 months
Due to the developing nature of the Coronavirus crisis, at present we cannot accurately predict when your investment will repay as that depends on the resumption of the normal operation of the UK property and lending markets. However, at present we expect extensions to be in the order of 3-6 months. You will still accrue interest during this period.
3. There is a risk that returns may be lower than expected
Given the Coronavirus delays and impact on the property market, we want to remind you that interest, like capital, is not guaranteed. In the event that there is a reduction in property values and this reduction results in our loans not being repaid at their original values, it is highly likely that the return on your investment will be lower than initially forecast.
4. Subordination risk remains a factor
We also want to remind you that your money is invested alongside other institutions, such as banks, to fund property loans. This is an important point because it’s these institutions that occupy a senior position in each loan and as a result they have more control than Propio investors and are paid back first. We want to assure you that we have been working on your behalf to support these institutions to make decisions that allow projects to move forward and complete. This in turn protects Propio investor capital.
How do I find out more?
If you’d like to understand more about the underlying loans you are exposed to, just login to your account, go to your Investments and download the Allocations Report in the Documents section. We’ve also upgraded this report to include a ‘status’ for each loan so you can find out more about each of the property projects that your money is financing.
We will contact you from now on each month to update you on any changes to your investments and repayment dates as the Coronavirus situation becomes clearer. If you have any further questions, please check out our FAQs or contact us at firstname.lastname@example.org.
The Propio Team