Gareth Davies

An interview with Gareth Davies: 'If January is anything to go by, then activity levels are increasing rapidly, and confidence is returning'



In an interview with Development Finance Today, Gareth Davies, head of development finance at Hodge Bank, discusses the outlook for the sector in 2020, the bank’s involvement in modular construction and how the relationship between lenders and developers can be improved.

As Hodge Bank’s new head of development finance, how do you intend to advance the bank’s proposition?

Hodge has been successful in creating products which are flexible and providing a service that focuses on the needs of our clients. I plan to continue building on this success by continuously reviewing our existing product range and working with our customers to better understand their needs. Having built a sizeable investment book in the past five years, we hope to continue to build a development book to broadly the same size over the next five. We’ll only be able to achieve this through continuing to work closely with our clients and providing quick and efficient delivery through the credit and diligence process.

How has Hodge Bank’s development finance activity been so far this year?

Our financial year commenced in November 2019 and, given the climate of uncertainty, we were pleasantly surprised by the strong level of enquiries we received during that month. Perhaps unsurprisingly, December was a slightly more challenging month. Between Brexit, a general election and, of course, Christmas, it became clear developers were taking a more cautious approach during the festive season. However, the general election proved to be decisive and, like it or not, the direction of travel has now become clear. I’m optimistic this will provide greater confidence to developers who may have postponed transactions until some clarity was provided. The first calendar quarter will be telling, but if January is anything to go by, then activity levels are increasing rapidly, and confidence is returning. It has been a very busy start to the year and the signs are positive for 2020.

Is Hodge Bank currently involved in many modular developments, and have you seen an increase in the number of enquiries related to such construction?

Modular developments don’t make up a significant portion of our portfolio and those we have sought to fund have often been for developers who also produce the pods/modules. When looking at outsourced product manufacture, the challenge for senior debt funders is to consider how those products made off site can be secured, and this has always presented a challenge. Innovative, sustainable products, which are good for the environment — or at least not bad for it — are becoming a high priority for developers. Funders, including ourselves, need to adapt to make sure we can deliver appropriate funding solutions for new developments and building methods.

How do you feel lenders and developers can better support each other?

During the past decade, banks have faced a great deal of mistrust, and for good reason. Ensuring there is trust between developer and lender, acting responsibly, behaving appropriately and building great and long-lasting relationships is vital. Ultimately, someone wants to borrow and the other wants to lend and, while both parties will need elements of protection, they should be able to work effectively and closely together given their end goals are so closely aligned. 

How did you get into the industry?

I qualified as an accountant with Grant Thornton in 2001 with my career up until then focused on corporate finance. I continued along this path after joining RBS in 2006, where I was mainly involved in funding private equity transactions. However, this market came to a grinding halt in 2008 as the impact of the global financial crash took hold. It was at this time that I thought I’d better consider my career options! I have a number of family links to real estate, including an architect, surveyor and a conveyancer and it’s always been of interest to me. From my previous role in corporate finance, which was a very transactional environment, moving to real estate finance has allowed me to focus on wider client relationships and create close links with developers. I’ve never looked back.

If you weren’t in finance, what would you be doing?

When I was younger, I always thought I’d be a lawyer, mainly because I watched too many dramatic movies and TV shows. While my career took me in a different direction, if I had my time again, I suspect I may well find myself targeting the law in some way. It’s a complicated world, and it’s not often you meet a lawyer who isn’t busy!


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