Omni Secured Lending is the alternative lending arm of the investment manager Omni Partners and is based out of London. They offer investors exposure to secured loans against residential as well as commercial UK properties. Since 2014, they have launched three successful secured lending funds: OSL I, II, and III, all of which have provided superior risk-adjusted returns. The majority of capital raised in the first two was from high net worth (HNW) Americans or family offices. The third fund has had massive interest from institutional investors and funds of funds.
The Amicus Platform
From distribution to underwriting down to servicing and recovery, everything is done in-house, and funding is a combination of both internal as well as external sources with the majority being third-party funding. Basically, Amicus is a lending platform providing professional property investors across the UK access to short-term finance solutions.
The average loan size provided by Amicus is £750,000, and the portfolio is split between 75% residential and 25% commercial properties. The company also operates in the PDR (Permitted Development Rights) segment meaning they are able to convert commercial properties into residential without having to apply for planning permission. This is an emerging opportunity allowing the lender to focus on the niche for better returns.
The Idea Behind Amicus
Born in 2004, Omni went from an equity-only event-driven strategy to adding private debt shortly after the financial crisis, which proved to be a master stroke considering the equity strategy performed strongly during the global crisis. The man behind the strategy was Steve Clark, founder of the company.
Clark realized the chink in the working of traditional banks and realized flexible lenders are the future of the financial industry. He also saw how multiple segments had been vacated by brick-and-mortar banks. Having been involved in the property market, he knew the pain points of builders and real estate agents. While researching the field, he came across the bridge financing market. After thoroughly understanding the nitty-gritty of the market, he rolled out Amicus in 2009.
Elissa Kluever: The Heartbeat of OSL
Elissa Kluever has extensive experience in the equity capital markets. Before joining OSL, she was with Pipper Jeffrey, a prestigious investment bank headquartered in the US. She was in their equity capital market division, which was responsible for raising capital for companies, and later shifted to their London office. In 2009, she joined Omni Partners and now is the partner and managing director of the credit and lending funds division.
Kluever is the nerve center between all concerned parties: Omni Partners, the manager, and the investors. She also takes care of Amicus.
Fund Structures under Amicus
Omni’s first fund was Omni Secured Lending I and was launched in February 2014. It raised $44 million and returned 112% of original investor capital in less than 27 months. It was also able to achieve a yield of 9.8% net IRR.
The second fund was OSL II , which was launched in April 2015. It raised $240 million while delivering a net IRR of 10.5%. Buoyed by the success of its two lending funds, the company recently launched its third installment of the fund and raised $437 million. The current net IRR of OSL III stands at 8.6%.
Types of Investors
All three funds target a different type of investor.
- Vintage 1 targeted HNW family offices along with single- and multi-family offices. The majority of those were US investors even though the deployment of funds is in the UK.
- Vintage 2. After the success of the first lending fund, family offices and fund of funds also showed interest in the second fund.
- Vintage 3. In the third installment of lending funds, pure institutional investors joined in as the obligation to provide returns in a record low-interest rate scenario triggered their shifting from bonds to private debt.
The fund hedges the foreign exchange rate (FX) exposure for American investors and safeguards investor money from FX fluctuations. Omni enters into a 3-month futures contract, which provides cover against any adverse FX movement.
Secondly, what makes the fund particularly attractive for American investors is the low LTV of 62% and the stringent lending rules of the UK, which guarantee full recourse to the borrower and his personal assets. In the US, investors have limited recourse. If the borrower walks away from the property, the lender can’t pursue him personally.
The gap between supply and demand of housing stock in the UK makes the economic cyclical fluctuations redundant. Hence, the fix-and-flip housing strategy is a safe bet in the UK, and especially in a market like London. The UK has a shortfall of at least 1 million houses, thus ensuring the demand will remain strong for the foreseeable future.
Written by Heena Dhir.