The event — which was held at Granary Square Brasserie in King’s Cross, central London, and moderated by Medianett Publishing’s senior reporter, Andreea Dulgheru — focused on the importance of having a strong, professional team when looking to secure development finance, as well as the roles communication and trust play in the funding process.
The event welcomed several experts who worked together to complete two facilities for property developers Jason Badham and Reemal Rabheru.
Jason and Reemal were joined by Avamore’s head of sales Adam Butler, head of asset management Toran Selim, senior analyst Spencer King, and senior underwriter Gili Cohen; finance brokers Elise Taylor and Joe Guilfoyle from Aureum Finance; Luke Masters, representing monitoring surveyors from Sillence Hurn Building Consultancy; and Deepak Ohri, partner at Underwood Solicitors.
The discussion started by focusing on the biggest challenges that developers are facing which, according to Jason and Reemal, revolve around supply chain and labour shortages, as well as cost overruns.
According to Reemal, these hurdles have made him take a “very pessimistic” approach to planning a development project, but has recognised that maintaining great communication with all parties is key to ensuring everything runs smoothly.
It was found that developers are not the only ones impacted; when asked about the changes in due diligence that Avamore has had to make as a result of these testing times, Toran stated that the lender now ensures there is a minimum of 10-15% contingency on every deal to account for any cost overruns.
Spencer added that Avamore has also extended the maximum loan term to 24 months (depending on the size of the scheme and the works required) to factor in any possible delays on site.
“It's really important to have that sales period at the end as well — most developers will assume [they need] a 12-month construction phase with one month for exit, but we find you need at least three, or even six, months to sell the units,” he divulged.
When asked about the best way to mitigate any time delays, Luke highlighted that interaction between all parties was essential to keep things on track and fix any issues that might arise throughout the project.
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“Whether that's a time delay around the drawdown, the sales process, valuation, or anything else, communication is the one thing that experienced and sensible developers are having.
“Open communication with your lender, contractor, solicitor [and others] is the best way to speed up a transaction — we know there are going to be delays, but nobody wants to be surprised by any information; they want to know about it when you [the developer] learn about it.”
Luke’s opinion was echoed by all panellists, who added that technology had played a significant role in improving discourse between all factions.
Among the fintech solutions used to arrange the loan for Reemal’s project, Elise pointed to the Nivo ID verification and messaging product that Avamore has integrated in its lending process.
“In my opinion, it's not hard to have your ID certified, but it can fall through the net and hold you up; the Nivo link system that Avamore is using really sped up that whole process.”
Adam explained that technology had been a big part of the lender’s growth over the past 12 months and improving this will remain a focus point over the next couple of years.
He also believes that technology will continue to be used in the lending process, making it easier to share and review documents, as well as maintain communication with those who may not be based in the same location.
During the breakfast event, the panellists also debated whether the current pain points in the market have altered the key qualities each of them look for when selecting their partners to complete a development finance deal.
For Jason and Reemal, the speed and simplicity of the transaction process were the top points they considered when selecting a lender for their projects.
They also said they prioritised working with finance providers they are familiar with and with whom they have worked before, rather than those offering cheaper rates.
Aureum’s process of selecting the right lender has remained the same and is based on the client’s requirements, which are highlighted from the outset.
“We hold a high level of knowledge and really value ourselves on that. We know what’s [available] in the market and which lenders want to lend to different clients,” commented Elise.
“Having the conversations with your client to understand exactly what they’re looking for allows the broker to then go forward and select the correct lenders.”
However, she emphasised that flexibility and the capacity to provide additional funds for contingencies were characteristics both brokers and developers value in a lender.
Adam stated that the willingness to collaborate and communicate honestly was integral when it came to considering and completing a development finance case.
He also stressed the importance of borrowers possessing a strong team behind them, particularly for first-time developers — something the other panellists agreed with.