Finance broker for the ultra-rich

By cecilia.chow@bizedge.com

March 29, 2015 12:00 AM SGT

Three years ago, Masood Rashid, founding partner of London-based boutique financial brokerage firm Opes Financial Partners, thought it was a great opportunity when he was invited by a top UK law firm to provide financing for potential buyers at a weekend property exhibition in Hong Kong and Singapore. The project showcased was located in the exclusive neighbourhood of St John’s Wood, with prices starting from over £2 million.

“There was a lot of activity, and people were busy buying and signing contracts to purchase,” recounts Rashid, 40. His business partner and director, Matthew Davies, who had attended the weekend exhibitions told him, “Wow, it’s like a new gold rush.”

However, it was soon clear that many of the buyers had no intention of securing a mortgage as they had started to flip their properties. “I saw it as a massive headache,” says Rashid.

That was the first and last time Opes took part in such an exhibition. Instead, he decided to focus on “offering bespoke financing solutions” to managers in Geneva, Switzerland and other major wealth hubs, including Singapore and Dubai. They found that many of the wealth man- agers do not provide lending services to clients — and Rashid saw an opportunity to plug that gap. The firm saw a lot of Russian clients and has since expanded its business to Asia and the Middle East.

Given Rashid’s financing repertoire, he was able to provide an attractive financing deal for a Malaysian high-net-worth investor recently. The businessman had purchased a £3 mil- lion property in London. A Malaysian bank was only willing to finance up to 65% of the purchase price, or about £2 million. As the maximum loan repayment period was 65 years, and the client was already 60, the loan term was very short and his monthly mortgage, based on capital and interest repayment, would have been around £40,000. “It was very high because they were looking at his age,” says Rashid.

When the investor was introduced to him, Rashid contacted a Swiss bank he had been dealing with. Within days, the bank agreed to finance the businessman. Based on an interest-only mortgage repayment, his monthly debt payment the ultra-rich for their purchases — from luxury London pads to private jets and yachts.

Beyond the UK, Opes also provides financing for luxury home purchases in other key jurisdictions in Europe, for example Southern France, Marbella and Barcelona, as well as Dubai. ‘Among the world’s top 5%’

His clients rank among “the world’s top 5%”, he says, and include the super rich from around the world, particularly the Middle East, India, Pakistan, Russia, Ukraine, the Commonwealth of Independent States (CIS) and China.

“My specialisation is in someone who’s big, who could possibly be a PEP [politically exposed person],” he adds. “[The term] refers to any- one who is politically connected. As long as you’re related to a politician — it could be a former or a current minister — you’re a PEP.”

With London being a global financial hub, almost every bank in the world has a presence there. Regulated banks include overseas banks that are licensed to operate in the UK, but have to comply with the regulations of the UK regulatory body, the Financial Conduct Authority. Non-regulated banks are those that do not have a presence in the UK, but could still provide lending for UK property purchases. As they are not governed by the FCA, they are considered non-regulated.

London property is considered a safe bet, and prices have a close correlation with gold prices

“But that doesn’t mean they are dodgy,” says Rashid. “They have to comply with the regulations in their own jurisdictions.” Opes works with both FCA-regulated and non-regulated banks to give clients greater access to financing solutions. “We’re at the top of the game, we know who’s in and who’s out of the market,” he adds.

Opes does its own due diligence on clients, and so do the banks it works with. Generally, if a client is on FCA’s “high risk” list, the banks will have to do “enhanced due diligence”, basically a more stringent process.

Recently, some of the major UK banks were reprimanded by the various regulatory authorities for being lax in their due diligence. The FCA used to post the list of 95 “high- risk countries” on its website. It includes almost every country outside the UK, North America and Australia, with the exception of Hong Kong and Singapore, says Rashid. The list was removed from the website late last year after Cayman Islands objected to being included for money laundering activities.

Many of Rashid’s clients are referrals from major banks. He cites the example of a businessman from a former CIS state referred to him by a bank. The businessman wanted to purchase a home in London, and was looking for financing. Rashid secured a £10 million ($20.38 million) loan at a very low interest rate. As he had a US$50 million ($68.5 million) deposit with an offshore bank that was paying him an interest rate of 15%, he was able to use the interest earned to pay his mortgage, and still earn £1.5 million a year in interest.

“It’s called arbitrage,” says Rashid. “People are hungry to borrow money. We can provide solutions [for them].” Naturally, Rashid has provided financing for some of the biggest residential deals in the UK, from a £50 million mansion to a £120 million property, as well as luxury apartments at One Hyde Park where prices are north of £6,000 psf. “In our line of work, discretion is paramount,” he says. “We’re dealing with private high-net-worth clients who want to stay private.”

‘London property prices comparable to gold prices’

Typically, when there’s an issue or a crisis in a country, there will be an influx of capital into London real estate, observes Rashid. For example, the problems in Ukraine last year saw an exodus of money. The Arab Spring conflict in 2012 saw money flooding in from Egypt and the Middle East. When France introduced the 75% tax on the rich, many moved to London, and purchased homes.

“People perceive London property as a safe bet,” he says. “There’s actually a close correlation between prices of London property and gold.” Rashid’s entire business revolves around the premise of this continuous flood of foreign wealth into London. “Our business has gone through the roof. As long as London continues to be a global city, we will continue to do good business.”

Rashid: My specialisation is in someone who’s big, who could possibly be a PEP [politically exposed person]

Having spent about a decade working for big mortgage brokerage firms in the UK such as Mortgage Matters Direct and John Charcol, as well as real estate equity firm Cobalt Capital Partners, Rashid started Opes together with Davies in 2011.

Initially, the duo visited wealth was £2,500, less than 10% of what he would have paid had he signed on with the Malaysian bank.

“The Swiss bank assessed him based on his overall wealth, and not just his age and income,” says Rashid. “He was a wealthy, self-made man with a lot of property.”

The quick flip

Among Asians, buyers of “big-ticket” homes in London tend to be Chinese, Indonesians and Malaysians, says Rashid. However, Hong Kong and Singapore investors tend to have a trading mentality.

“A bubble has been created over the last four years, with people buying and selling upon completion,” says Rashid. “Many of the units are completing in the next two years. And if lending dries up, and the owner can- not secure a buyer or complete the purchase, he will be forced to sell at distressed prices. So, this is going to be a problem.”

Those buying a flipped contract (or UK properties in a sub-sale) tend to find difficulty in securing financing. “There may have been one or two banks in the UK that had initially allowed it, but now they are saying no to reassigned contracts,” he adds. “So, a lot of these buyers whose game plan is short-term — buying and flip- ping the contract before, or at, completion — are going to struggle as there won’t be much of a market.”

Rashid was recently referred to a Singaporean investor who had bought a UK property on a reassigned con- tract. He helped him secure a bridge loan until completion. Upon completion of the property, the owner will exit the bridge loan and secure a long-term mortgage at a lower interest rate. “It’s a complicated structure,” admits Rashid. “But it has to be structured in a way that doesn’t kill the deal for the buyer.”

This article appeared in the City & Country of Issue 670 (Mar 30) of The Edge Singapore.

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