PROPERTY & INVESTMENT
How would you describe the current market ?
How can developers make sure their lender is the right fit ?
Gareth Davies ( GD ): I would describe it as buoyant . It depends on what you ’ re comparing it to . If I go back to before the global financial crisis , the only lenders at that point in time were the large high street clearing banks , and that was the only opportunity for developers at any scale . The global financial crisis presented a great opportunity for challenger banks , second-tier funders and peer to peer , and we ’ ve seen that grow enormously over the last decade or so , and now there are hundreds of different funders , whether UK-based or further afield from the UK .
Is it easier to get funding ?
Ross Gandy ( RG ): They [ big banks ] take a long time to make decisions ; it ’ s a heavy process and they don ’ t like risk . But they do a good job of supporting clients who don ’ t have risk with good interest rates and services .
Alternative lenders like EstateGuru find alternative options for clients who have a bit of an adverse record . We ’ re more of a story lender than algorithm lender .
GD : Given the options that are out there , developers need to make sure they are getting the best price they can achieve for the right leverage , and make sure they have a good ongoing relationship with the funder , who will be around for not only this development but future ones .
What types of developers would put you off giving them a finance deal ?
GD : We need to make sure we are lending to an experienced developer . There is funding for new developers , but that ’ s not something that we offer .
However , we lend to people rather than businesses , and make sure we are happy with their experience and confident in the developer delivering on what they say they can . Obviously , the more experience that someone has , the wider the funding opportunities for them .
We ’ ll speak to any clients who have a certain amount of experience and have a real estate background and a solid business plan . We need to know how long the term is and when they expect to exit , and we ’ d look at cash flows and pictures of the site and land before we would lend , and we ’ d also do a credit check .
Gary Palmer ( GP ): The banks really rely on a client ’ s balance sheet to support the transaction , but some of the non-bank lenders rely less on the balance sheet and more on the development itself , to consider funding . There are some products available to assist , such as bridging finance , presale facilitation if you are short of the required equity , and we know of people becoming partners in a deal to provide equity , so there are quite a few facilities to help developments along .
It ’ s quite difficult to get funding for retirement developments , but you do get companies with strong balance sheets and a good track record , who are still managing to get funding , but usually with the support of a ‘ big brother ’ investor .
We ’ ve also observed a trend towards mixed-use developments being popular to fund ; for example , a development made up of retail , residential units for sale and a hotel component . In the residential space , it ’ s got to be a bit of a destination , offering more for residents than just a block of flats to buy into , which would ’ ve sufficed a few years ago .
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