FR: What are you seeing from brokers and borrowers at the moment, and how has that changed this year?
There’s certainly a greater demand for flexible funding. We’re seeing more re-bridging and capital raising, alongside the auction purchases, chain-breaks and refurbishments that have always been a natural fit for bridging.
Re-bridging is an excellent example because there can be several reasons why the original exit hasn’t happened. A property may have taken longer to sell or the borrower’s circumstances may simply have changed, so you have to understand what has happened rather than treating every re-bridge in the same fashion.
And brokers are, justifiably, putting greater emphasis on speed, service and certainty because their clients are often working to fairly unforgiving deadlines. They need fast decisions, but they also need decisions they can really rely on. There’s not much value in getting a yes within an hour if it gradually turns into a no over the following three weeks.
That’s something we focus on at StreamBank. We want to establish early what the borrower is trying to achieve, where the potential difficulties are and, most importantly, whether we can genuinely deliver what the broker needs.
FR: Does the increase in re-bridging suggest borrowers are finding exits more difficult?
In some cases, yes, but I wouldn’t automatically treat a re-bridge as evidence that something has gone badly wrong. Property transactions have a habit of refusing to follow the original timetable.
This still doesn’t remove the need for a credible exit, but it does show why you need to understand what has actually happened. With any re-bridge, we want to know not only why the original facility hasn’t been repaid, but what has changed since it was put in place and why the revised strategy gives us confidence that our facility will be repaid within its term.
If the original exit was unrealistic and nothing has changed, giving somebody another bridging loan isn’t going to solve very much. But where the borrower has a sensible, revised plan and the fundamentals remain sound, re-bridging can provide the additional time needed to complete that plan properly.
That’s where our common-sense, storybook approach to underwriting comes into play. Rather than seeing the words ‘re-bridge’ and immediately reaching a conclusion, we want to understand the circumstances behind it, what is different this time and whether there’s a credible route to repayment.
FR: Are property investors still looking to grow, or has the focus moved towards managing what they already own?
We’re still speaking to experienced investors who want to grow their portfolios, although they’re being more selective about what they buy and where they put their money.
Refurbishment and value-add projects are an important part of that because investors are looking at properties where they can make improvements themselves, rather than simply buying something and hoping the market does the work for them.
Auctions are another area where we’re seeing opportunities, particularly where a property isn’t suitable for mainstream finance in its current condition. Of course, putting a property into an auction catalogue doesn’t magically turn it into the deal of the century, so investors still need to be disciplined about the price they pay and what they intend to do with it.
We’re also seeing investors make better use of equity within assets they already own. We recently provided a £1.5m bridge to support an investor buying a £3m shopping centre in County Durham, but the bridge itself was secured against a Grade II listed property in Derbyshire valued at £3.75m.
There were multiple titles and additional legal work involved, so it needed a little more thought. But the borrower had considerable equity, a strong credit profile and a clear plan for repaying the facility.
That’s a good example of what bridging can do for an experienced investor. Sometimes the opportunity isn’t about financing the property they’re buying directly, but using the strength of their existing assets to help them make their next move.
FR: With more complicated cases coming through, is there a danger that lenders become too reliant on criteria?
Criteria are obviously important, but specialist lending also needs room for judgement because plenty of the cases we see have something about them that requires a bit more explanation.
A case can change quite considerably once you start asking the right questions. You might have an unusual property or an exit that requires further explanation, and none of those things automatically means you shouldn’t lend.
Our approach is to understand why the transaction has been structured in a particular way and then decide whether there’s a sensible route forward. Having access to the underwriters makes a big difference because we can discuss those issues early, rather than everybody spending days progressing a case before somebody finally asks the awkward question.
And that doesn’t mean finding a way to say yes to everything. Sometimes the right answer is no, and brokers appreciate that far more if you give it quickly, explain the reason and allow them to get on with finding another option for their client.
FR: Has that made the relationship between the broker and BDM more important?
Absolutely. When a case doesn’t immediately fit, trust and transparency become even more important because the broker needs to feel comfortable calling you while the case is still taking shape.
Sometimes a five-minute discussion can establish whether there’s a route forward or identify something we need to investigate before the application goes any further. That can save everybody a considerable amount of time later.
I’ve learned from working with brokers that listening is probably one of the most important parts of the job. It’s easy to hear the first few details and immediately start thinking about a product, but once you understand what the client actually wants to achieve, your approach can change completely.
That’s particularly true of the exit. Getting somebody into a bridge is only half the job; you need to understand how they’re getting out of it as well.
And those broker relationships are earned over time. A broker isn’t going to trust you with an important case because you’ve bought them a coffee and spent 20 minutes telling them how brilliant your lender is. You earn it by giving clear answers and then doing what you said you would do.
FR: Where do you see the biggest opportunities in specialist property finance over the next 12 months?
I’d expect refurbishment, value-add projects and auction purchases to remain important areas, particularly among experienced investors.
Capital raising should be important too. There are borrowers with substantial equity sitting within existing properties who don’t necessarily want to sell an asset every time another opportunity comes along, and bridging can give them access to that capital where the security and repayment strategy support it.
Ultimately, that flexibility is one of the things I’d like brokers to associate with StreamBank, alongside reliability, competitive pricing and fair decisions. We’re not going to be able to lend on every case that crosses my desk, but we’ll look at it properly and give the broker an honest answer.
I’m naturally an optimist, which probably helps when you’re presented with some of the scenarios we see in specialist finance. Although optimism has its limits - unfortunately, it still can’t persuade a valuer to come in at the figure everybody was hoping for.
If there’s a sensible deal to be done, though, I’ll do everything I can to help the broker get it over the line.
