Bloomberg: Financier Bets on $812 Billion Private-Debt Market

March 16, 2020

By Ben Stupples

John Beckwith has put money into London hedge funds, Indian sports-marketing firms and Parisian nightclubs over a five-decade career that made him one of the U.K.’s richest financiers.

Now his family office, Pacific Investments Ltd., is looking to Spain’s private debt market.

It’s financing the loans of Xenia Capital, a provider of private credit targeting residential property developers beyond the region’s biggest real estate firms. Beckwith’s son Piers is leading the startup, which opened an office in Madrid last year as it seeks a foothold in a global private credit market that totaled $812 billion in June 2019, according to London-based research firm Preqin.

“We’re definitely filling a gap,” the younger Beckwith said in an interview. “We see so much opportunity.”

More wealthy families are investing in private debt at a time when central banks are keeping economies afloat with cheap- money policies and negative yields, making assets that used to preserve family fortunes less effective. Meanwhile, the coronavirus outbreak has obliterated trillions of dollars of value from global markets.

Piers Beckwith, 41, said he expects Xenia to close four loans in a matter of weeks. With its loans usually due for repayment more than a year later, the firm may offer some protection to the Beckwiths’ wealth during the economic upheaval caused by the virus, even if Spain’s property market falters later.

“Family office capital and investment time frames are much longer term,” said Robert Weeber, chief executive officer of wealth-management firm Tiedemann Constantia. “That ties in with a more illiquid market,” such as private debt, he said.

John Beckwith, 72, made his money in real estate, teaming up with his brother Peter in 1971 to found property developer London & Edinburgh Trust, which was sold in 1990 for 510 million pounds ($643 million).

The Beckwiths have since acquired stakes in British hedge funds Thames River Capital and Nevsky Capital, currency services firm Argentex Group Plc and West End theaters, with returns of at least $100 million.

They’ve also invested in Frontiers Group India, which buys advertising space in sport stadiums, and in 2009 set up an 800- person nightclub -- Le Palais Maillot -- down the road from the Arc de Triomphe. Pacific Investments sold it four years later for 4 million euros, a gain of 22%, according to its website. The family’s other businesses include Pacific Asset Management, which oversees more than $1 billion. Piers Beckwith’s twin brother Henry helps run that firm.

Many family offices have only turned their attention to private debt over the past few years, often doing so alongside other investors through funds to save costs and the hassle of sourcing deals.

That’s not the case with the Beckwiths, who have turned private debt into a business.

Latest Venture

Almost a decade ago, frustrated with how long it took to secure bank loans, they invested in Zorin Finance, a U.K. lending platform for homebuilders. The firm has made more than $700 million in loans since, according to its website.

Piers Beckwith helps to run Zorin, and he’s aiming to repeat its success with his latest venture, which offers short- term loans of as much as 50 million euros ($56 million) with average annual interest rates of 15%.

Beckwith owns Xenia with two other senior executives from outside his family -- Rory Buchanan and Gonzalo Barrios – and relocated to Madrid. Xenia has completed about a dozen loans in as little as two weeks -- faster than most banks -- and some borrowers are already repeat customers, Beckwith said in the interview.

“It’s about having boots on the ground,” he said of relocating to the Spanish capital from London. “I’m still involved in the family business, but we’re properly going for it down here.”

Financial Crisis

Quicker access to capital isn’t the only reason Spanish real estate firms are turning to Xenia.

Banks, scarred by the financial crisis, remain hesitant to lend to newer small and medium-size homebuilders. That has created opportunities for alternative lenders as Spain’s property market has rebounded.

The financial crisis gave Spain a $38 billion property hangover. To mitigate risk, his firm typically offers loans set for repayment within two years and avoids places where Beckwith and his team see volatile prices, such as the Spanish island of Ibiza.

Xenia also focuses on loans for affordable homes, cutting the risk of unsold units, and it doesn’t rely on one lender either -- even if it’s Beckwith’s own family. Xenia receives additional financing from Corecam, an investment firm based in Zurich and Singapore whose clients include rich families. Though it’s still early days for Xenia, other institutional firms are already taking note.

“We’ve now got institutions that are contacting us, which is a really nice place to be in, to say we want a bit of that,” Beckwith said. “There is definitely a chance to grow Xenia into as big as Zorin.”

To read the article on Bloomberg click here.

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