I’m not exaggerating when I say developers haven’t been this active for the best part of a decade. Part of the reason for this, of course, is the significantly improved availability of finance beyond the high street banks.
In the aftermath of the global financial crisis, a whole new breed of specialist lenders and challenger banks have emerged that are willing and able to finance the development projects we need so much. They’ve been a massive enabler of projects around the UK.
And because of the increased competition, loan rates have become more competitive and loan-to-cost ratios have also risen to new highs, which again stimulates developer activity levels. The fact that the supply deficit acts as a hedge for developers is the icing on the cake.
Against this backdrop, we are seeing more and more brokers start to get active in the sector, and those who are, are reaping the financial rewards.
- Just 8% of brokers believe government will hit 2020 housing target
- Enterprise Finance enters development market
- Amicus lends £9m for redevelopment of historic Manchester building
To an extent, they’re pushing at an open door: in every town and city of the UK there are currently small- and mid-sized property developers hard at it and these are the ones that brokers are perfectly positioned to help. Even first-time developers are finding it easier to secure finance, at least if the applications are presented to potential lenders in the correct way.
Whether developers are focused on office-to-resi conversions, mixed-residential schemes, straightforward new builds or even larger commercial projects, the finance is almost always there. Packages can range from more straightforward development loans to bespoke facilities that involve senior debt, stretch senior and mezzanine finance, subject to the level of gearing required. Equity funding is also an option.
Admittedly, some of these loan areas can be pretty complex and even off-putting for some, but the good news for brokers introducing clients to specialist packagers is that they can be as involved as much or as little as they like.
Unsurprisingly, given the sums lent for most development projects, the fees payable aren’t too bad either. The other bonus, of course, is that brokers with development finance in their armoury have further diversified their business model, which reduces risk. And that’s always a good thing.