North East Loan Trust sees revenue and profits fall in ‘transition’ year

A real estate investment trust run by Newcastle Tier One Capital wealth managers has increased dividends to shareholders despite falling revenues and profits in what it called a “transition” year.

TOC Property Backed Lending Trust PLC (PBLT) saw revenue fall from £2.3m to £1.6m in the year to November 2021, while pre-tax profits fell from £1.1 million to £930,000 over the same period due to reduced investment interest.

In the trust’s annual accounts, chairman John Newlands said the dividend would rise from 3p to 4p after the previous year, in which the PBLT board, advised by Tier One Capital, opted to maintain liquidity levels and therefore reduce dividend distributions.

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During the year, the trust made profitable outflows on five loans totaling £9.8m, generating an initial rate of return of 10.9%. However, five projects to which LTBP lends are “impaired”, meaning that the borrower is in default on its loan contract, late in payment, full repayment of the loan is uncertain, or there is a shortfall in the value of the underlying asset.

Impairment provisions amounted to £208,000 during the year.

Meanwhile, a total of £8.26 million was invested in 10 projects, including five new loan facilities set up during the year, which covered projects in Scotland and the North East. Another £7.9million pipeline is in various stages of due diligence on three projects, all located in the North East.

The net asset value (NAV) of the trust fell slightly to 83.88 pence during the period, from 83.93 pence in 2020, due to declared dividends exceeding net profit for the year. The total net asset value return increased from 3.9% to 4.8%.

Writing in the accounts, Mr Newlands said PBLT’s strong balance sheet, investment headroom and agility should put it in a strong position.

He said: “Over the past year, the business and indeed the economy as a whole have, to say the least, faced an uncertain environment. The workforce has either been placed on full lockdown or, at other times weakened by Covid-19 absences and/or working from home Government dictates.

“More recently, we have seen the emergence of geopolitical risks around the world, including wars and soaring energy costs. In addition, the financial effects of Covid-19 will likely be felt in the form of a increases in taxes and changes in the fiscal policy of interest rates and inflation.These factors are likely to have significant effects on the real estate sector, Brexit-related impacts being less significant.

“The UK government’s furlough schemes, while undoubtedly successful (albeit horribly expensive) in averting a full-scale recession, have also been scaled back over the year. Also in the background, a combination of shipping lanes devoid of cargo ships due to Covid-19 problems and post-Brexit administrative nightmares have led to supply chain blockages – a particular problem in the building and construction sectors.

“Despite these headwinds, the company’s portfolio overall maintained its value during the year under review and produced a positive total return for investors when dividends are taken into account. The decision following the “Strategic review, to maintain liquidity, meaning to stay partially in cash, while these issues play out, has helped in that regard.”

Earlier this month, PBLT set up a £2.15million loan facility to support Harrow Living Ltd in developing a luxury housing scheme near Morpeth. Harrow, which has taken an initial drawdown of £1.26million, is building four five-bedroom luxury homes on a one-acre plot just north of town and plans to complete the project this summer.

Previously, PBLT supported a 145-unit scheme in County Durham by Kenly Homes and a 61-unit development on the outskirts of Darlington in conjunction with Maven Capital Partners and Calmont Homes.

Sallie R. Loera