24hr Fund Raise for Unique Site, in Hugely Competitive Locale

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Picture the scene, an existing client retained our services to provide a fast (sub 24 hours) bridging facility to enable the acquisition of an existing property and adjoining plot of land in the ‘city of dreaming spires’.  The opportunity being a short 15 minute walk from Oxford University.

We dropped everything to achieve Lender Heads of Terms in under 24 hours from the initial enquiry.  

It was a delight to be able to provide robust evidence of funds to enable our client to negotiate the final price (£900,000) and timeline with the vendor, secure the land, and allow legals to commence.  

The borrower, a very reliable and well established developer, did not want to miss out on such an opportunity given the location.  They were able to ring-fence cash for the deposit, and the percentage gearing gave a good selection of what the market had to offer.  The pressure was one of time and any failings on our part meant the loss of the opportunity, the forecast £1m profit which goes with it, and I expect, the client’s future business.  

We knew the lender who would support the bridging facility almost immediately, so we began a program of works with a tireless effort that saw us build the submission and supporting documentation into the evening, allowing us to present Lender Heads of Terms to our client the following morning.

The facility agreed was net £683,000 which would be required for a minimum period of 3 months with interest chargeable at 0.95% per month.

After delivery of the Lender Heads of Terms and the client securing the property/land, we were able to widen our search and research to bring down the interest cost and fees associated with the facility.   This was achieved by putting in place a development finance facility ‘day one’, so that the client did not have to use a bridging loan and therefore the additional set up fees and higher interest associated with this originally sourced ‘interim’ product.

If you or your clients require quick action from a committed, reliable and well connected team then we may be what you are looking for.  We are client side, and act at pace to put in place the funding you need, when you need it.  

Get in touch and run your scenario past us today.

Mark Reidy
Business Development Director
Mark@ConduitFinance.com
T 0131 564 0275
M 07775 678 087

Fund to Peer or Peer to Peer?

Tighter regulation on retail banks and looser regulation on new to market lenders, initially without any regulation, has resulted in a marked increase in the volume of property lending provided by peer to peer lenders.

Business models, mostly the ones seeking growth, are moving away from the retail investor as they are too slow to react and their cost of capital reduces the net return for the platform/peer to peer business.  They have adopted family office or fully institutional funding lines.

Most volume lenders rely in the first instance on a primary underwriter to take on loans quickly, then the constituent slices are sold down to the individual people classified as retail lenders.

The primary underwriter position is a very lucrative one as their pot of liquidity can be utilised many times during a year, so the annualised returns can be multiples of 1000%.

Most of the lenders we speak with rely on a pension fund or private equity investor to write the "larger" loans.  Most are actively seeking new funding lines for growth, before the big sell off comes and the peer to peer platforms are bought directly by private equity funds.

Smaller lenders can operate profitably without the need for deposits or the additional complexity of Financial Conduct Authority “FCA” approval.  That said, we are yet to see a full cycle; lend / repay / default / recover / re-lend, or even multiple full cycles to generate reliable data on risk, returns and defaults.

Counterparty risk is a hot topic and specifically relevant when considering new borrowing. Estimating how aggressive or consultative a lender will be if you default is almost impossible, but you can guarantee insolvency practitioners are currently courting peer to peer lenders for future work.

There are so many providers in the various sub-sector spaces within the market that tracking them, and their daily evolution, is challenging.

Jamie Davidson | Loans over £10m and restructuring | Jamie@ConduitFinance.com
Andy Lawson | Loans over £1m | Andy.Lawson@ConduitFinance.com
Edward Page | Loans under £1m | Ed@ConduitFinance.com
Sean Crombie | Business Development | Sean@ConduitFinance.com
Mark Reidy | Business Development | Mark@ConduitFinance.com

Residential Development Finance – Latest Funding Prices

Having returned to the UK after working overseas, it is clear that the property development finance market is quickly evolving.  The widespread under supply of housing is supported by huge demand from occupiers and investors alike. 

The various sub-sectors are all equally active, with student housing and private rented sector both at the forefront.  As such the lending market is evolving by the day, with more and more liquidity coming into the market.  Loan to costs are increasing, while pricing is compressing.

We have seen an increase in the number of lenders active in this sector.  Retail banks are providing rates as low as 2.50%, and stretched senior lenders can provide attractive loan to cost facilities at 90%. 

This week we have received several telephone calls from newly active lenders looking to deploy capital into the UK residential development finance market.  Most of these lenders are backed by private equity funds or family offices seeking income yield.

Lender type                    Loan to cost                Lenders fee             Rate pa              Exit fee
Family office                    100%                            2.00%                       7.00%                 0% of profit
High LTC 1                       90%                             1.00%                        10.00%                1.00% of debt
High LTC 3                      85%                              1.50%                        6.50%                 1.00% of GDV
Lean pricing 1                  65%                              1.00%                        3.00%                 0.00%
Lean pricing 2                 50%                             0.50%                        2.50%                 0.00%

2016 is likely to be an active year for lending in the UK, with 2015 having seen the highest levels of property finance since 2006.  We would anticipate that there will be an inevitable increase in the lenders risk appetite, and a reduction in the net cost of finance as lenders compete for transactions.

If you have any requirements we can directly quote for, then please do not hesitate to get in touch with me by email or phone below.

Sean Crombie

Sean@ConduitFinance.com
DDI: 0131 564 0274
M: 07595 520 577

The Evolution of Highly Geared Private Debt

The Evolution of Highly Geared Private Debt

In both vanilla and also restructuring transactions private debt is playing a pivotal role in making transactions happen.  The use is broader than its name might suggest.  It spans both corporate and property borrowing, and can come from private individuals, family offices or from larger funds.

There is a global availability of private debt lending from a range of sources, all of whom are hungry for an upper single digit, or double digit return per annum.  There are a number of local, US, European and Asian funding lines currently active in the UK.  These lenders are active in London but the real margins they seek are accessible in the regions.

Their appetite and liquidity is driven by a number of macro reasons such as the contraction of
European and U.S retail bank’s balance sheets, and the lack of dividends and yield available from equities.

These lenders have several unique selling points, such as short reporting lines that enable quick decisions to be made, pan‐European appetite out of one main office, and their flexibility when structuring covenants.  

If their benefits were ranked then gearing would be number one, certainty and ability to quickly deliver as number two, and number three would be the repayment structures, which can be interest only, rolled up or back loaded.

Recent term sheets we have delivered include: 

• 75% loan to value (LTV) facility on a single tenant office investment acquisition, at a 6.00% rate with only 4 years remaining on the lease.
• 90% LTV for a well located commercial building refinance at an 8.00% rate, which was going through a Bank of Scotland Business Support Unit (BSU) restructuring.
• 75% LTV bridge finance facility at 1.00% per month, for a hotel and land site exit from Royal Bank of Scotland Global Restructuring (GRG).

Pricing can vary depending on the transaction, with the leanest rates from 4.00% per annum for well located property investment lending, up to 15.00% for infrastructure lending.  They invariably seek “make whole” provisions to ensure they get a fixed return.

Much like the rest of the UK property and corporate lending market, there is a brisk evolution happening.  Interest margins are being compressed and there is a gradual uptick in LTV’s, which leads to a direct correlation in increased risk.

The record high volumes of lending in 2015 look set to continue into 2016 and beyond. 

Jamie Davidson I Managing Director I 0131 564 0172

Search for private debt bridging options here: Property Finance Finder

www.ConduitFinance.com

Mark Reidy strengthens the team at Conduit Finance

Mark Reidy has joined the Conduit Finance team as Business Development Director.  He brings 20 years of financial services experience to the Edinburgh head-quartered team.  Prior to taking up this role he worked closely with property developers for the Checkmate division of Lockton Companies LLP, one of the world’s largest privately owned insurance brokerages.  

Mark also spent time in the senior team of Buildstore, who specialise in self-build, custom build and residential development funding.  He is a client focussed and service driven business professional, who will help provide clients with bespoke solutions under the Conduit Finance and PropertyFinanceFinder.co.uk brands. 

Conduit was launched in 2007 by Managing Director Jamie Davidson.  Conduit Finance has continued to provide a point of difference in Corporate Finance for SME, Corporate and Property clients.  Factors that differentiate Conduit from the competition include their extensive panel of established and emerging lenders, the technical ability to structure deals, their solvent restructuring track record and expertise, and their dedication to increasing their clients' wealth. 

Mark joins the eight strong team and will be working closely with Managing Director Jamie Davidson to improve the client proposition, grow revenue and improve processes.  Jamie said “The appointment of Mark to the team is a real win for both the business and our clients.  Mark’s proven high levels of service, trust and transparency are well aligned with the values within our business.”