The specialist commercial and residential property lender has foreshadowed that it will look to issue more residential mortgage-backed securitisation (RMBS) issuances, given the strong demand from investors, particularly institutional support.
Thinktank, which had previously focused on commercial mortgage-backed securitisation (CMBS) transactions (having so far issued $2 billion of rated bonds), recently closed its first RMBS issue for $500 million, after having upsized it from $400 million.
The bonds were placed with 21 institutional investors of which 83 per cent were domestically based and 17 per cent offshore. Real money investors represented 57 per cent of the total amount issued while banks accounted for 43 per cent.
According to the lender, its residential mortgage book had been growing since the non-bank started offering residential mortgages in 2017, but had particularly escalated this past year.
Thinktank director Per Amundsen commented that he had been somewhat surprised by the growth in its resi loan book, given that the lender had traditionally focused on self-employed, professionals and small- to medium-sized employers (SMEs).
He commented: “But, obviously, these self-employed, professionals and SMEs also want residential finance, and Thinktank, via its deep and trusted network of mortgage brokers and aggregators, is well-positioned to provide this as an adjacent product.
“By 2018, residential loans had steadily grown to comprise between 10 per cent and 15 per cent of the book. However, COVID has seen that percentage of loans grow to about 50 per cent today.”
Mr Amundsen suggested that the surge could be attributed to the fact that “two factors have been at play”.
“[Firstly] commercial finance activity fell. A pandemic that was understandably shaking business confidence and shrinking the economy inevitably meant a slowing demand for commercial loans. Across the market, commercial lending activity initially fell by around 40-50 per cent, and borrower hardship support grew,” he said.
“But to the market’s surprise, and, to be honest, Thinktank’s initial surprise, residential lending quickly picked up, so much so that calls have emerged for regulatory intervention to take some heat out of the market where the higher risks are perceived.
“The fact the company funded more than $1 billion in loans in the 2021 financial year can be largely ascribed to a combined increase in residential and SMSF lending, more than compensating for the temporary decline in commercial lending.”
While the Thinktank director said that the commercial property market has generally been recovering well since the initial shock of COVID-19, he noted that it still lags demand for residential finance.
As such, he suggested that Thinktank’s diversification strategy into residential lending had allowed the company to weather the COVID-19 pandemic’s economic impact on commercial lending.
Mr Amundsen concluded: “Thinktank is looking at two or three new securitisation transactions in 2022, potentially two residential and one commercial, each of which is expected to be larger in size than preceding transactions.
“Thinktank is confident of strong underlying and ongoing institutional demand for forthcoming issues, further enhancing its reputation in a still growing and important market that is a vital part of the supply of credit to Australian business and consumer borrowers which, in turn, offers product diversification and significantly adds to competition with the country’s major banks.”
[Related: Thinktank closes $600m CMBS]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.