"Our facilities are utilised for a wide range of purposes including acquisition, planning gain, portfolio restructuring, capital release and investment, to name but a few."
We spoke to Gerard Morgan Jackson, head of structured property finance at United Trust Bank, about how structured finance facilities can be utilised and what new products the Bank has recently launched.
FR: What is structured property finance?
It is a bespoke and innovative form of short to mid term property funding. It is often sought when other traditional forms of funding lack the flexibility, speed or capability to suit clients’ unique circumstances.
Essentially, we provide our customers with time and liquidity to facilitate their goals. We lend against a wide range of property assets including residential, commercial and mixed use property across England & Wales. Residential can include alternatives such as HMOs and student accommodation and commercial can include industrial, leisure and retail, the latter especially when part of a residential led mixed scheme.
Funding covers portfolios as well as standalone properties with facilities available from £1m to £30m. Whilst we do not fund all asset classes, we will consider all proposals on their merits. Working with our customers and introducers to engineer, create and deliver tailor made funding solutions.
Clients are typically entrepreneurial property investors and/or developers who will identify and target real estate with value-add opportunities, typically, through intensive asset management. The client will usually enhance the value and/or transform the asset using the funds we provide. Clients can also include corporations and trusts with complex ownership structures.
Our facilities are utilised for a wide range of purposes including acquisition, planning gain, portfolio restructuring, capital release and investment, to name but a few. For example, we recently completed a £5.3m facility enabling our customers to purchase some light industrial premises as part of a site assembly plan which should eventually result in them building 156 new homes in South London. Following the planning approval, we will look to fund the development costs and possibly the investment finance once the scheme completes. Another interesting example would be the revolving facility we provided for a student housing developer. The facility allowed them to buy, renovate and then hold the assets within a fluid 5-year facility.
FR: How has the last 12 months affected business?
UTB remained very active in the market throughout 2020. We always look to build long term relationships with customers rather than just transact on one-off deals. Having this type of relationship allows us to support our customers when the economic climate becomes turbulent. For example, although other lenders withdrew from the sector or became very cautious when Covid struck, we continued to support our customers with their existing and new facilities. Despite the country being locked down for prolonged periods, our entrepreneurial customers still wished to seize opportunities. There were operational challenges to overcome, but we implemented technology solutions and adapted processes to ensure we could continue to provide the funding our customers needed. This bold approach saw us welcome several new customers to the Bank who had been turned away by their usual lenders and resulting in the Structured Property Finance loan book growing by over 40% in 2020.
FR: What are your plans for the rest of this year?
We’re continuing to support our clients through an uncertain period. The long-term fall-out of the pandemic is still unknown but key risks are clear, including the withdrawal of the Government’s economic support schemes. We are also yet to see the full implications of Brexit and inflation is something we need to monitor closely. We expect our residential related lending to continue to perform strongly but are now also seeing commercial lending opportunities and are keen to support our clients to exploit them. We will continue to step up where other lenders are hesitating, helping to avoid the lack of liquidity which occurred in 2008 when major banks’ reluctance to lend effectively strangled the economy for several years.
FR: Have you launched any new products?
Whilst the core of our lending is on a bespoke basis, we have recently announced that we’re lending up to 75% LTV on commercial and mixed use property supported by the Recovery Loan Scheme (RLS). We can lend up to £10m to qualifying borrowers in our public private finance partnership with HM Government working through the British Business Bank.
FR: What are your longer term goals for the division?
Having personally facilitated over £1bn of lending since joining UTB, I am keen to see the structured property finance division exceed that same goal. We are continuing to invest in the division; building the team and evolving our proposition to increase our market share. Our innovative and commercial approach has enabled us to surpass £700m of new business from a standing start in 2017. We’re proud of this impressive growth, especially given the difficult economic environment we’ve experienced since then. Our success is testament to the team’s ability to deliver results in the toughest of circumstances.