Asset class: How to leverage the value in luxury goods

Raising debt against real estate is nothing new, but superyachts, aircraft, art, classic cars and fine wine? Alex Ogario, Head of Knight Frank Finance’s Private Office, helps clients to raise finance against all these.

He and his London-based team of five advise ultra-high-net-worth individuals on alternative ways to increase their liquidity, and are experts in leveraging shares and collectable assets. Here, Alex lifts the lid on his department’s highly specialised work.

Let’s start at the beginning – how did you come to this job?
I joined Knight Frank Finance as a broker in 2013 covering the Knightsbridge and Belgravia offices. Four years ago, the firm acquired VanHan, a high-end property agency that strengthened the service we were already offering ultra-high-net-worth individuals investing in real estate.

We decided to complement that business by creating our own private office to secure financing for those clients who are typically operating in the £10m-plus bracket. I’ve headed it up ever since.

Given your clients are wealthy, why do they still need help with financing?
A number of our clients are billionaires and, of course, they can buy things in cash, but often there is a distinction between wealth and liquidity. Our clients usually have a range of assets in their portfolios. They understand the value they have but they don’t always understand how best to unlock it. They may not have thought about borrowing money against the value of a classic car, for example, to help finance a property purchase.

When borrowing, which asset type do you consider to be the best to raise finance against?
Generally, borrowing against shares is even cheaper than property finance. Previously, we’ve helped clients who have sold their business to a listed company. They believe the shares will appreciate in the long term, so they don’t want to liquidate their positions.

But, they do want to diversify. Just recently, we helped an entrepreneur to raise several million pounds very quickly against shares.

Is it possible to borrow against collectable assets?
Yes. People buying the right wine and art have done pretty well over the last few years and there are banks who will lend against that. For example, we raised $3.5m against art at a 50 per cent LTV on a two-year term loan.

The advantage with a piece of art is clients can take some equity out before they plan to sell it or take the money before it goes to auction. Wine debt is quite niche and specialist lenders in this space operate more like funds.

What about raising finance against newer, less tested assets, such as NFTs and cryptocurrencies?
Some institutions we know will lend money against cryptocurrencies. We recently obtained terms from a lender for $6.5m at 65 per cent LTV against Bitcoin, but where valuations have gone through the floor, it starts to become uncomfortable.

How do you add value when your clients already have so many advisers around them, including, in many cases, family offices?
Some advisers are not close enough to this market and our advantage is we do this day in, day out. We know what questions to ask and who to ask. We’ve had several cases where we’ve introduced the client back to their own bank, on better terms.

So your work doesn’t always need to be linked to a specific property transaction?
We started in real estate brokerage and that remains our raison d’être, but as a by-product we have picked up clients looking to do other things. Like all the best relationships, we find that what we do for our clients evolves naturally over time.

James Ashton is a freelance financial journalist and former executive editor of the Evening Standard