The interactive afternoon — which was supported Allica Bank, Alternative Bridging Corporation, Colenko, Fleet Mortgages, Hope Capital, Market Financial Solutions (MFS), Sopra Banking Software, United Trust Bank, and YBS Commercial Mortgages — was based at The Courthouse Hotel in Soho. 

Chaired by Medianett Publishing’s managing director Beth Fisher, the panellists included James Bloom, director at Alternative Bridging Corporation; Mark Elliott, BDM at Sopra Banking Software; James Mole, director at J3 Advisory; and Adele Turton, managing director at Blanc Property Finance.

When discussing issues property developers are facing, Bloom described rampant material and labour cost inflation in recent years as a “real problem”, with rising interest rates now contributing to reduced margins for developers.

“We haven't really seen the corresponding fall in land prices yet; I don't think there's a realism in the market that takes into account the fact we have seen massive wage and material inflation.

“So, it's been a dual problem for the developer client where the margins are being squeezed at both ends.

“Costs are going up, it’s very difficult to buy at a reduced price, and it's caused a real problem.

“Where we were seeing perhaps 25-30% return on cost as the minimum, clients are coming to us with 10-15%; we have to be very careful on the type of projects that we fund and, as a prudent lender, we don't fund projects without sufficient margin, for obvious reasons.”

Mole agreed, adding: “Rates have obviously made it quite difficult for developers at the moment.”

He stated that “trying to work out what high interest rates means for them on their deals and how they can get them done” was the biggest challenge.

“It's more than just the cost of interest, it's how that increased cost of interest within a gross loan affects your day one; if you've got a larger interest tranche within the gross facility, that's going to have a knock-on effect on bringing the day one down, which means the equity required for a scheme is going to go up.

"So that has definitely slowed things down.

“I think costs are going to be high for a while and the industry has more or less gotten used to that. 

“There are problems around payment terms on certain things — such as timber frame manufacturers going out of business — which is surprising, considering they all want all the money upfront, or at least a large proportion, and they still go out of business. It's beyond me.” 

Adele added that she was seeing major issues with contractors, with some “disappearing with the first payment” and then having to change the contract half way through a scheme. 
 
According to Adele, “every deal is a battle”, a statement Mole concurred with. 

Mark also brought up the lack of technology uptake in the property development space: “I think that the industry as a whole is not great at using the technology that's available in order to increase efficiency in the processing of deals and releasing tranches during the life of a [loan].

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“Uncertainty means that people don't want to spend large amounts of capital on things like software”.

Further evidencing the need for efficiency in other areas, the results of a live audience poll during the session revealed it was unanimous there had been an increase in property developers experiencing delays with their projects over the past 12 months. 

Bloom pointed to inexperienced solicitors not knowing what’s needed to complete deals quickly and efficiently as a significant hurdle.

“The biggest single problem that we have in our whole business, and I think most lenders would agree, is often the solicitor not understanding what's needed.

“You're often up against a solicitor that really doesn't know what they're doing because they're not a commercial solicitor.

“When a client sits in front of me and they say, ‘When am I going to complete my deal? How long is it going to take?’ I give them the same answer, ‘It could be a week, it could be a month, it could be a year,’ which isn't very helpful.

"But I then go on to explain that we will get everything done as quickly as we can — we're a prudent lender and we're quick — but we can't do anything as a lender until we get the answers that we need."

All of the issues the industry is facing at the moment are seemingly leading to a hesitancy from developers in the market, with Bloom stating that: “Undoubtedly, people are nervous—why wouldn’t they be?”

Despite this, the panellists displayed some cautious optimism. 

“Whenever there's a challenge, there's an opportunity for a broker,” commented Adele. 

She explained the role of the broker was to fix things and create solutions for clients, such as getting involved in replacing a contractor, helping with due diligence that may have been missed, making sure tranches are received on time and the JCT is correct and, of course, pairing the borrower with the right lender that will work with the borrower and see things through.

Adding to this, Bloom stressed the importance of working with a lender that understood the project’s goals and pitfalls, stating that: “There’s opportunity for well-capitalised developers; if you've got the right funding and you're borrowing at a sensible LTV, there's opportunity.”

Adele summarised that the past four years has taught the property development market that things are “never what you expect it to be”, but that doesn’t mean a successful outcome can’t be reached. 

“And that is the key— being able to adapt and keep moving forward.”

The Specialist Finance Symposium featured four panel discussions on bridging, development finance, commercial mortgages and BTL, welcoming brokers to ask the titans of the industry their burning questions.

Pictured above L-R: James Bloom, director at Alternative Bridging Corporation; James Mole, director at J3 Advisory; Adele Turton, managing director at Blanc Property Finance; Mark Elliott, BDM at Sopra Banking Software.