KC Securities InvestingKC Securities Background

ABOUT

KC Securities Limited Partnership
KC SECURITIES
Overview

Founded in 2001,KC Management Ltd (“KCM”) is a New Zealand based investment manager who is the General Partner of KC Securities Limited Partnership (“KCS”). KCS is an entity formed to hold the investment fund. Founded in 2017 the predecessor to KCS and KCM were founded in 2001.

We aim to deliver a quarterly income of 8.5-11% p.a. plus up to 5%+ uplift over an initial 5-year life that is scalable and consistent across cycle as well as over the long term.

KCS provides secured mortgage loans to borrowers with equity, and is backed by the ownership of select commercial real estate properties.

Direct Lending
Secured mortgage loans to borrowers with Equity

Direct Ownership
Invest in the ownership of select properties to balance the Company’s portfolio

KC Securities Limited Partnership Overview
Target Fund Size
Current Assets
NZ$35m+
Target Fund Size
Target Fund Size
NZ$75m Gross asset
Target Fund Size
Minimun Investment
NZ$250k
Target Fund Size
Sector
Commercial Real Estate
Target Fund Size
Asset Class
Equity-backed Debt
Target Fund Size
Return Profile
13-15% p.a. total return (8-11% p.a. distributed quarterly)
Team

General Partner. KC Management Ltd
Advisory Board
Mandate & Investment Strategy

LAST UPDATED 31 August 2019
KC Securities investment strategy allows us to invest across the capital structure in New Zealand CRE debt and equity based on our asset-based and value-add investment approach respectively.

We invest in mortgages over property (usually within first mortgage criteria), investment property that we actively manage, and other property opportunities whereby we can buy and sell and make a profit. This is what makes KC Securities different to a finance company, listed property company or owning your own property.

We make asset-based lending decisions that focus on the financial strength and underlying value of the collateral that secures the loan rather than on the credit history of the applicant. The length of these loans is generally between six months and two years for amounts ranging from $250,000 and $10m.

KCM, maintains a disciplined and efficient investment management approach with a rigorous investment process based on thorough due-diligence and experienced judgment.

Investers Security
Our Investment Process

KC Securities Investment Process
SOURCE
  • KC Securities exploits its strategic position within the New Zealand real estate market
  • Principles have been in the business of lending since 1982
  • Transaction Sourcing – extensive network of relationships to identify proprietary opportunities
  • General Partner investment recommendation
  • Advisory Board Approval
KC Securities Investment Process
INVEST
  • Targeted investments NZ$250k -NZ$10m, Placement 4+ years, 5 year lifetime
  • Due Diligence: in-house research and 3rd party specialists
  • Valuation methodology: financial strength and underlying value of proposed collateral
KC Securities Investment Process
MANAGE
  • Continually monitor and, where appropriate, KCS is involved in the decision making processes of its borrowers
  • Asset Management: in-house management of direct assets and administration of loans
KC Securities Investment Process
VALUE-ADD
  • The GP has hands on experience in value-add as well as the ability to take possession of distressed assets and reposition them as required
KC Securities Investment Process
EXIT
  • Realise investments and deliver a superior risk-adjusted absolute return to our investors over a 5-year period
Why KC Securities ?

WHY NEW ZEALAND ?

Market opportunity

  • “In a turbulent world, NZ stands out as a reassuringly sturdy beacon of stability, openness and fair dealing”

Distinct yield advantage compared to other mature markets in the Asia Pacific region

  • Significantly higher at 6.2% for prime stock and 7.3% for secondary stock

Established shortage of housing in New Zealand

  • See graph Estimated New Zealand new housing supply and demand.
Estimated New Zealand Housing Supply and Demand

Stable and secure political and economic environment

  • Consistently ranks highly internationally for governmental transparency, democratic institutions and low levels of corruption
  • GDP growth is forecast to remain near 2.8% – 2.6% for the next three years
  • Long-standing flexible exchange rate – there are no exchange controls or restrictions on bringing in or repatriating funds
  • NZD: AA+ local currency rating, AA foreign currency rating, AAA T&C Standard & Poors
  • 3rd in the world for tax competitiveness by the Tax Foundation, 2018
  • 1st easiest country to business by the World Bank 2018 | 5th Best Country for Business by Forbes, 2018

Strong institutions and sound English law legal framework

  • Judicial system is independent and robust
  • Private property rights are strongly protected, contracts are secure and intellectual property rights are enforced

Large government spending projections

  • NZs government is committed to maintain budget surpluses in the future
  • Government debt remains well under control at 22.2% of GDP, 2017, and is to be reduced to 20% by early 2022s
WHY NOW?

Limited number of trading banks subject to restrictive RBNZ regulation creating liquidity tightening

  • Loan-to-value ratio restrictions faced by traditional financiers means borrowers are increasingly turning to alternative lenders
  • See graph Commercial Property Annual Credit Growth
  • Multiple property owners (investors) are buying 41% of all the residential properties sold
  • New residential mortgage lending to investors dropped to $0.89 billion in February 2019, a 14.5% decrease from a year ago
  • In the last 2 years many apartment projects did not proceed under original plans – circa 20 of these sites are currently being remarketed for sale or have sold, three have been abandoned under current proposals and two have been deterred
Commercial Property Annual Credit Growth