With the recent surge in property development finance enquiries and applications in the marketplace, there have been a number of new lenders entering the market in addition to the established lenders flexing their existing products and offerings to become more competitive and, in some instances, broadening their geographical horizons.
Whilst maximum loan to values and loan to costs have generally remained fairly static with the mainstream development finance lenders, we now see a number of specialist lenders who have “stretched” their senior debt proposals to 80% or even 90% of project costs, using a blended interest rate or slightly higher exit fee to reflect the perceived risk at that level of exposure. That said, and again reflective of the level of competition, a couple of the new entrants to the market offer up to 80% of costs with no exit fees, and at a very competitive interest rate.
A selection of bridging lenders now also offer “heavy” refurbishment products which goes some way to servicing a part of the development market, but their appetite generally remains fairly conservative and they will not touch “ground up” developments.
There is an abundance of “private” development finance lenders throughout the country who seldom advertise their services and therefore remain “off radar” to most seeking finance. These smaller operations often choose exclusive broker partners to work with, are not bound by rigid criteria and do not always rely on a 3rd party surveyor to advise them what the end product will be worth.
Quite a significant proportion of developers are looking for Joint Venture or equity participation and profit share deals, generally due to them having their resources committed to other projects. 100% funded Joint Venture deals enable a developer to take a profit share without committing any of their funds to a project. Naturally such lenders require a very experienced developer to partner with and will “cherry pick”, but provided the project shows the required profit margin, there is an ever growing panel of lenders to consider for both residential and commercial schemes.
At times like this, it is essential for a developer to use the services of a specialist, experienced broker. We have a constant influx of cases from other commercial finance brokers who prefer to use our expertise and experience to guide them through the variety of lenders and help avoid the potential pitfalls, and also to access our exclusive sources to find the very best deal.
