You won’t often see us talking up Robert Peston but he makes some very good observations in his recent blog on why Quantitative Easing is not leading to more bank lending.

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/08/what_rbss_results_say_about_qe.html

There is a strong correlation between the strength of bank balance sheets and the volume of capital available for commercial real estate? Banks have to shrink their loan books and the toxic world of property is a great place to start.

To support Peston’s theory here is one little anecdote. The best performing loan originator at one major bank group is currently deemed a start performer having only written two loans in 2009. The reason being that he has won a load of new deposits, from cash rich property investors. He has lent about £100m and collected £500m of deposits. His perfect customer has lots of cash and no need for troublesome new loans.

As my grandfather used to say, “that’s the problem with banks, they only want to lend money to people who don’t need it!”

Those who follow the “hit parade” may have heard the worldwide smash hit single Guru Josh Project Infinity 2008 http://www.youtube.com/watch?v=w9KnuJZkBjg.  Older “cheesy quavers” might even remember the original version from 1989. 

The Guru’s (real name Paul) publicity machine has explained away the intervening 19 years by outlining various new media projects he was involved over this period.  It strangely doesn’t mention his “lost years” as a comically bad satellite installation man in Ibiza, during which time he was living in a caravan.

Years of DJing and “high living” had left Paul deaf and completely bonkers, but a nice enough guy who I wish well with his second shot at the big time.

This level of revisionism, has also been very evident in the property industry recently.

In a number of recent examples, that David Irving would have been proud of, property CV’s have been completely re-written to completely excise entire businesses that might damage some high profile reputations; fund managers with bankrupt subsidiaries, lauded entrepreneurs with entire portfolios of disastrous opco-propco investments, etc…..

At the end of the day it would appear that good PR is money well spent, after all they say, history is written by the victors.

We are pleased to report that we have closed the acquisition of a senior loan in partnership with Development Securities. Given there are various confidentiality issues associated to this, I will simply quote the stock exchange announcement that Development Securities made this morning. We will tell you more as and when appropriate.

“Development Securities announces acquisition of property backed senior loan for approximately 
£10.0 million

Development Securities, in conjunction with Ellandi LLP (’Ellandi’), announces the acquisition of a senior loan secured on a neighbourhood shopping centre in South West England. The loan was acquired at a significant discount from a leading UK high street banking group. Development Securities have invested approximately £10.0 million in the transaction and own 100% of the loan at closing. The loan is currently performing and interest payments are being met by the borrower in full. The Company will initially receive a yield in excess of 10% per annum in relation to the investment.

Notwithstanding its performance, the loan is presently subject to a loan to value covenant breach which has precipitated the decision for the UK banking group to dispose of the loan.  The acquisition was financed out of the proceeds of the Company’s recent equity fund raising, completed in July 2009.

Development Securities consider the loan to be well secured and given the discounted purchase price, offers numerous potential management options. Due to confidentiality constraints, the Company is not able to provide further information at this stage but hope to make further announcements in due course.

Ellandi is a specialist investment manager focused on UK commercial property. Ellandi specialises in acquiring property related debt, recapitalising distressed property situations and investing in direct real estate. Subject to the future performance of the investment, Ellandi may receive a carried interest as part of the management arrangements.”