FR: Is the relationship UTB has with brokers an important part of business for you and, if so, why?
Yes, absolutely. The majority of our new lending is introduced by brokers so they are vital to our success. Also, having a strong relationship with an experienced broker who understands development finance greatly increases the chances of a proposal being accepted and proceeding to a successful completion. A good broker will help us to acquire the information we need to be able to quickly make a formal offer and later to facilitate our due diligence by ensuring good communication between the lender and the borrower. Dealing with proposals expediently is good for the Bank, good for the borrower and good for the broker so we are always happy to hear from experienced professionals with well-researched and robust proposals.
FR: What do you foresee for development finance in 2013?
We’ve had an extremely busy first half of the year and have surpassed our 2012 lending total already. The volume and size of developments we’ve been approached to fund have increased significantly since the start of the year and there’s no sign of that level of activity decreasing anytime soon. From talking to brokers and developers there’s growing confidence that all around the country buyers are returning to the market and as a result builders and developers are increasing their output, progressing sites that they’d previously moth-balled until the market improved. 2013 could very well be the year when the UK property market finally sees some sustained recovery and as a result I expect us to remain busy throughout this year and into 2014.
FR: What advice would you give to anyone looking to start up in the industry?
Anyone looking to become a development finance broker should first understand exactly what information development finance lenders need in order to consider proposals. A good broker can add value by helping the lender to secure the information they need from the outset or by acquiring it very quickly once the lender has requested it. A lender will look more favourably on a proposal where the developer and the broker have done their homework and made an effort to prove that their development is suitable for the location and that there will be strong demand from purchasers able to transact. In addition, a lender will like to see evidence of the developer’s previous projects in order to demonstrate that their client is experienced in the sector and if the developer is to subcontract the majority of the build it’s a very good idea to include evidence of the main contractor’s previous experience as well. A thorough and realistic breakdown of costs as well as target sale prices will enable the lender to take a view on whether the quality of the end product is pitched correctly for the market. For example if a developer is proposing to build a luxury house but is only budgeting for very basic fixtures and fittings it would call into question whether the developer properly understood their market.
Brokers should also try to understand the differences between each lender so that they take their clients to a lender with an ability to deliver on transactions within reasonable timescales.
FR: What do you feel sets UTB apart when it comes to development finance – what do you offer that other lenders don’t?
I’m going to be biased of course but I believe that at United Trust Bank we have one of the most experienced and knowledgeable teams of development finance professionals you can find at any lender. We have a dedicated team of Property Development Directors each with several decades of industry experience, we have a first class support team and the Bank has both the capacity and a real appetite to lend. Throughout the last five years, when other lenders pulled down the shutters on development finance, we have been a constant in the marketplace, enabling developers to build even when other lenders have turned them down. We have a deep knowledge of property and property finance and our many years of experience means that we are good partners in both good and difficult times.
Once a project starts, cash flow is vital. We are very highly regarded for our swift processing of monthly certificates. It’s something developers often remark on and as they rely on having the money available when they need it in order to pay suppliers and contractors and keep the project moving.
We also put a lot of effort into maintaining our relationships with brokers through publications such as our regular newsletter ‘Update’, our monthly case studies, which help brokers to understand the sort of developments we can help with, and we have lots of useful information in the broker centre of our website. We also attend events such as the recent NACFB Expo and host hospitality events at our London offices. The individuals in the team also have very strong relationships with brokers built up over several years and through working with us on several projects often with the same developers.
FR: You recently launched a New York broker promotion for 2013 for brokers who complete the bank’s online surveys. Can you tell me more about that?
Yes, it’s a great prize! Throughout this year brokers will have several opportunities to gain entries to the prize draw. On offer is a fabulous long weekend for two in New York, including an insider tour of Wall Street and a helicopter sight-seeing trip of Manhattan. For example, the winners of our recent wine tasting challenge at the UTB offices were all awarded an entry, and brokers who complete UTB’s online surveys will also earn their place in the draw. There will be more opportunities to enter during the rest of the year and of course, the more times an individual enters, the greater their chances of winning.
FR: UTB has been offering secured funding facilities since 1955, what are the major changes UTB have seen in the market over that time?
That’s 58 years of lending and it’s fair to say that the economic landscape as well as the banking industry has changed beyond all recognition in that time. It’s perhaps more useful to look at what’s changed more recently, since the turn of the century. 10 years ago credit was very easy to come by and most developers had little trouble going to his or her regular business bank for funding or requesting a substantial increase in his overdraft in order to start the next project. In 2008 that all changed and suddenly developers found it much harder to get credit as banks hoarded their cash and became very cautious about lending in a falling market. Some lenders even backed out altogether. This shift presented a great opportunity for brokers to add value by helping developers to find lenders who were willing and able to back their projects. Over the last few years many brokers have cemented their positions by becoming extremely well versed in helping developers to put together robust development finance proposals and presenting them to the right lenders. Nowadays lenders really value the contribution good brokers can make to the success of a deal.
From the lending side the withdrawal of many mainstream lenders led new entrants to spot an opportunity to step in and fill at least some of the gap. There has been a wave of new non-bank lenders who raise capital by means of investment funds, wealthy individual investors and more recently peer to peer lending, though it remains to be seen whether this is a viable source of funding for anything but very straightforward cases. The proliferation of new lenders is good for competition but brokers should also consider the lender’s heritage, stability and reliability as well as the interest and commission rates when recommending a lender to their client. After all UTB has been a specialist in this market during all seasons. We were active before the crash and have continued to support our developers and brokers during this period. Constancy in the market is something to be valued.
