In June 2020, in response to the fact that investors told us they were looking for low and medium risk opportunities in the current environment, we were excited to make our first commercial real estate (CRE) bond investment available through BrickVest.
We started by offering investment in an AAA-rated cash-flow project: a bond to facilitate the acquisition of a prestigious historical building in the premium marketplace of Luxembourg town centre, tenanted by a government department.
Why bonds, now?
Bonds have tended to be unattractive in low interest environments because investors are reluctant to lock into fixed rates, if they believe that the only way for the interest rate to go is up. We are indeed in a low interest environment, with the ECB at 0% at time of writing. However, rates are still going down and our polls indicate that many industry players believe the low interest rate environment is set to endure for some time.
In this context, a bond offering an annual fixed rate return of the likes of 2%, more than 200 bps above the prevailing interest rate (the coupon rate set for BrickVest’s first bond offering) is in fact quite attractive.
In addition, social and economic uncertainty resulting from the COVID19 pandemic and jerky stock markets together mean that “old reliable” fixed income instruments such as bonds are being given strong consideration as investment options.
How does bond investment work on BrickVest?
Investment in bonds is currently offered as a “direct investment” option through BrickVest, with investors who express an interest being introduced directly to the deal sponsor. They will have the possibility to take the total available (if they get in early enough) or to invest a set amount as part of a club deal. Our first bond offering was for a total of €12.7m, with investments from a minimum of €1m accepted.
Investors in this type of fixed rate bond will receive periodic payment at a fixed rate of interest, set by the issuer at launch date (for example, 2% annually).
BrickVest strives to offer a wide range of alternative investment strategies to its clients. We believe that opportunities to invest in this type of unlisted security - which benefits from lower volatility than listed bonds - and competitive, realistic pricing - based on estimated capital value rather than market sentiment – represent an excellent complement to the many other types of real asset investments available through our marketplace.