Nick Oakley

Decisions, decisions



Development lending is an increasingly crowded market, as new lenders enter the fray and existing brands diversify in the hunt for new opportunity.

This trend looks set to continue in 2018 and intermediaries are arguably spoiled for choice. But, when it comes to choosing a lender, it’s important that you don’t let too much choice get in the way of making the right decision.

So, amidst a wealth of options, how do you choose a lender with whom to partner?

The key word here is ‘partner’, because a successful development deal is not as simple as just placing a case. It can be an involved process and while the period between application, approval and drawdown may be just a couple of weeks, it can stretch to a matter of months. During this time, it is important that there is effective collaboration between the lender, the intermediary and the developer and this is where choosing the right lender is crucial.

Once you look beyond the fundamentals of a particular case – such as GDV – loan to cost, location and rate, you will likely be left with a shortlist of lenders that all potentially fit the bill.

At this stage, your selection will come down to more subjective factors, such as service and experience, both of which really equate to peace of mind for you and your client. Can you be sure that you will receive clarity of decision where yes means yes? And will your lender be accessible and responsive throughout the process?

Realistically, these should just be hygiene factors to which any lender should aspire. Smart lenders use their experience to add value to you by proposing innovative solutions for your client.

As an example, we recently worked with a broker to help a property investor purchase 98 apartments within a large block in an up-and-coming area of Liverpool.

The client planned to increase the capital and rental value of the investment by updating the communal areas and carrying out improvements to some of the apartments, with the intention of selling approximately 60 of the units over a three-year period.

We advanced 65% of the purchase cost on day one, with interest roll-up on 50% of the loan for the first 12 months. This meant the investor could use more of the rental income to fund the improvement works and also cover rental voids while units were being sold.

The loan was advanced on a three-year term and carried a covenant whereby should the LTV fall below 50%, the rate would reduce. In addition, up to 25% of the principal amount could be repaid each year without incurring an early repayment charge.

This solution not only helped the client to buy, update and sell 98 apartments, but it also meant that they benefited from a lower interest rate as assets were sold and the LTV was reduced. It was a good example of effective collaboration delivering a positive client outcome – and this should be your main consideration when choosing a lender.


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