Industry experts split on the ‘experience debate’

Industry experts split on the 'experience debate'



What constitutes as an ‘experienced’ developer anyway? This was one of the questions Development Finance Today put to a range of lenders and brokers .


And what constitutes as an ‘experienced’ developer anyway? These were the questions Development Finance Today put to a range of lenders and brokers and the responses gained were mixed to say the least…

Some had a clear definition.  Bob Sturges, Head of Communications at Omni Capital said: “In our view, a developer can be considered experienced only if they have felt at first hand the property market in all its various, and inevitable, conditions,”.

“Any developer who hasn't tasted the bitterness of a sharply falling market, or felt the deep frustration of trying to secure funding in the midst of a liquidity drought, cannot really be considered fully-rounded,” he said.

Omni Capital works exclusively with development professionals with experience and provide stretched senior development funding facilities. It requires evidence of a successful track record in residential or semi-commercial property development and expects the developer to a properly formulated and realistic project plan. 

“Before lending, we require the developer to provide us with a high-level executive summary of the proposed scheme, detailing the scheme area and number of units, exit value and cost assumptions, and a development and sales programme,” Bob said.

“Some other lenders take a different approach and are prepared to offer facilities to less experienced developers,” he added.

“The additional risk this involves is likely to be reflected in the terms offered and the price charged. We take no planning risks and require all appropriate permissions to be in place ahead of lending.

New Business Executive, Ashley Ilsen of development lender Regentsmead, feels that measuring experience as a developer requires common sense. The firm lend to both experienced builders and project managers and launched a JV scheme earlier this year.

“Regardless of their role, we look at their previous projects completed and ask ‘are the works they have been involved in pertinent to what they are looking to take on next?’” said Ashley. “How experienced a client needs to be is as long as a piece of string.”

Ashley acknowledges that there are often uncontrollable factors that lead to things going wrong on site that are out of the developer’s hands. “The difference between an experienced developer and a non-experienced developer is firstly stopping avoidable problems and secondly putting things right when they do go wrong,” he said.

Some potential developers find themselves in a situation where they can vouch for their ‘theoretical experience,’ however they may lack ‘experience’ on paper. For example, this can occur with clients who know how to build and deliver a product from experience working for large house builders and construction firms but have never borrowed under their own name.

Andrew Hosford, Director of specialist brokerage Voltaire Bridging Finance said: “This can be an issue as they have no track record as a borrower, even though their track record for delivering high end developments is impressive,”

 “We have, on a number of occasions, introduced exiting development clients of Voltaire’s to the new developer and they have formed Joint Ventures.

“Essentially the borrower is lending his track record to the new developer in return for a share of the profit.”

“This has worked well and has helped to launch a number of new development clients and companies.”: he added.

Henry Wilson-Holt, an analyst at Imperial Blue Finance, also felt that it is becoming increasingly common for investors or funds to bring people with suitable experience on board with the development SPV in order to provide comfort to both debt and equity providers via joint ventures.

“Experience per se is not as important as experience that is both recent, and relevant,” Henry said.

His colleague at Imperial Blue, analyst Harry Cloke, added: “Some of the most innovative developers come from the least experienced backgrounds.”

“If the numbers add up, we have the expertise and wherewithal to realise a project's potential,” Harry added.



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