The specialist real estate investor and asset manager decided to enter the lending space after noticing a gap in the development finance market and currently focuses on mezzanine, unitranche and bridging finance, offering terms for between one and four years.
“Through our investment activities, we were always aware of a gap in the market for a lender who could take a holistic approach to underwriting and structuring of smaller-ticket commercial development and refurbishment loans and consequently be more of a funding partner than a lender,” explained David Irving, managing partner and co-CIO at Grainmarket.
“We approached the market through some trusted brokers and agents and have been very encouraged by the demand we have seen for our product having now processed in excess of £750m in loan applications.
“We have begun to market more widely and are keen to extend our offering through the broker community.”
Grainmarket – which is funded by US institutional capital and co-invests in every single deal – has already offered terms on over £100m of loans and is targeting a portfolio in excess of £200m in 2019.
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“Our funding partner and structure allows us a lot of flexibility in the types and terms of loans that we look at, while our co-investment ensures alignment with our US institutional partner.”
Its focus is on whole loans between £10m and £30m – with a capacity to fund up to £75m – but will also look at smaller loans down to £5m.
Grainmarket are finding significant traction with sponsors focused on value-add and value-generation activities such as residential and PRS development, spec office development and repositioning and conversion plays.
“Our ability to underwrite the sponsor, the business plan and the asset in a bespoke manner really sets us apart.
“As investors, we understand the sponsor’s mindset and being able to speak their language and assimilate information quickly has been well received.”
David added that it understood that developments faced numerous obstacles with potential for cost overruns and delays.
“One unique feature of our debt product is a cost overrun facility.
“No fees are charged for this and interest is only charged when drawn.
“We understand how frantic the final stages of a project can be and this facility allows the developer to focus solely on completion.”
The company’s investment, development and asset management background allows it to evaluate each potential loan with an equity lens and structure its facility around the business plan and underlying cash flow profile.
“As a result, we can offer higher advance rates than our competition, allowing borrowers to preserve equity.”