Private credit is a broad sector encompassing various forms of non-bank lending. It includes property secured lending and lending to businesses with little or no recourse to any real property assets. Within the property secured lending space sits commercial real estate non-bank lending.
RMBL offers investors the choice of investing in commercial real estate first mortgage-backed loans. These loans have varying characteristics that enable investors the ability to construct an investment portfolio that aligns with their investment criteria, including preferred risk and return profiles. However, like any investment, commercial real estate mortgage funds come with their own inherent risks. Understanding these risks and implementing strategies to manage them is crucial for investors looking to diversify risk and optimise their returns.
Unveiling the Challenges
Some of the key risks investors need to consider include:
Capital Risk –investment in the fund is not capital guaranteed.
RMBL mitigates capital risk by:
- maintaining conservative lending ratios;
- obtaining valuations and other expert reports at appropriate intervals;
- diligent management of the loan book; and
- using risk and compliance measures.Interest Rate Risk – RMBL’s ability to achieve investment objectives may be impacted by movements in interest rates. For example, if a loan has a variable interest rate in an environment where interest rates decrease, the Fund's return on that facility may be lower than returns that may be available to investors from other fixed rate-based investments.
RMBL may use its discretion as to whether to advance debt facilities to borrowers on either fixed or variable
rates, however most of our loans are variable.Market Risks - Downward shifts in the property market may impact on the capacity to recover the amount
owing under a loan if default occurs.
RMBL mitigates market risk by:
- maintaining conservative lending ratios;
- obtaining valuations and other expert reports at appropriate intervals;
- diligent management of the Loan book;
- regular reviews of borrowers and development projects; and
- staying informed of changes in the property market on a daily basis.Default Risks - There are a variety of factors which could adversely affect the ability of borrowers to fulfil their payment obligations or otherwise cause the borrower to default. These include but are not limited to changes in financial and other market conditions, interest rates, government regulations or other policies, the worldwide economic environment, and changes in law and taxation. As a consequence, interest payments may be delayed or reduced for investors, or lead to losses for the Fund.
RMBL mitigates default risk by:
- maintaining conservative lending ratios;
- obtaining valuations and other expert reports at appropriate intervals;
- diligent management of the Loan book;
- regular reviews of borrowers’ circumstances; and staying abreast of changing economic, market and political conditions.
Charting the Course: Managing Mortgage Fund Risks
The team at RMBL are dedicated to managing the quality of our loans and the risks that can affect our investors. Many of our borrowers have been borrowing and often investing with us for over30 years. RMBL’s focus over the past 5 years has been on supporting borrowers who are well known to RMBL and have a history of delivering successful property transactions.
RMBL is continuously monitoring and reviewing the performance of loans to ensure we are identifying any emerging risks and proactively addressing concerns before they have potential to impact investors.
In addition, we seek advice from our broad range of external experts to help us better manage the portfolio of loans and provide additional intelligence on changes and trends in the market.
By maintaining the quality of our loan book and understanding and managing these risks, RMBL is able to continue to deliver uncomplicated monthly returns to investors, which is what we have been successfully doing for over 60 years.
