In last week’s update we explained why the running income or measures of loan serviceability were the backbone of bank lending where as “replacement cost” of an asset at loan maturity was instead a key factor in assessing loan risk in our investment process.
This week we are providing some current loan examples to show the practical application of this comparison. Looking specifically at the office sector, we have financed the construction of two Melbourne office developments over the last 12 months and are undertaking due diligence on several new opportunities. These loans have helped to diversify the Partners Fund by increasing the office exposure to ~15% from zero 12 months ago.