July 24th, 2024
Short-term loans becoming increasingly popular among larger borrowers
What: Hampshire Trust Bank has provided two bridging loans of £25m and £10m to borrowers in Yorkshire
Why: The loans support the development of a £500m mixed-use development project and luxury shopping outlet
What next: Bridging lenders are welcoming increased interest from larger borrowers
Hampshire Trust Bank has underwritten two loans with a combined value of £35m that underline the increased uptake of bridging finance among larger borrowers, Green Street News can reveal.
The specialist lender provided a £25m bridging loan to Commercial Estates Group against the Kirkstall Forge site near Leeds, which has a £500m gross development value (GDV). The debt consolidation bridge will help progress the scheme, which will ultimately provide over 1,400 homes, offices, hospitality and leisure venues, as well as a nursery and transport infrastructure.
The challenger bank also provided the developers of Scotch Corner Designer Village, a 250,000 designer shopping outlet in Yorkshire, with a £10m land bridging loan. The project, which has a GDV of £200m, is currently 70% prelet to major international retailers and in the process of obtaining development finance.
The new loans show how bridging is becoming more popular among larger developers, says LEXI Finance, which advised on the transactions.
“Bridging is also becoming more acceptable to the bigger players in the market, where previously it was more the preserve of the SMEs,” said Sam Le Pard, director at LEXI Finance.
“We now see alternative lenders and private equity houses with debt teams offering 12 to 18 month terms for higher returns where previously two years was the minimum. Likewise, larger sponsors are more open to the use of bridging to solve a problem or facilitate a deal. This is a reflection of the continued rise of the alternative lender taking more market share away from high street banks.”
“In 2023, we bridged several commercial assets that had unfortunately come to the point of refinance when yields had tanked and finance costs had rocketed, making term lending impossible. Similarly, in January, we structured a £19m loan for a residential developer to enable them the time to sell their unsold stock.”
This year, there has also been an uptick in demand for finance from developers in London seeking planning permission for student accommodation and co-living schemes, as well as brown-to-green office projects.
Land loans are becoming popular again, after a retrenchment in 2023.
“We’re now seeing lenders up to 60% LTV for loans secured against land where the residual land value (RLV) is higher than the existing use value of current buildings. This demonstrates a higher tolerance to risk as RLVs are notoriously impacted disproportionately from a range of inputs. This also shows bridging lenders think we’ve hit bottom and it’s safe to lend again,” Le Pard added.
Read the original article in Green Street News here.
April 5th, 2022
The funding is secured against Pocket’s Addiscombe Grove project
What: Pocket Living has secured debt from Pluto Finance
Why: The money is secured against its recently completed scheme in Croydon
What next: The deal will accelerate the deployment of the funds to support the delivery of Pocket’s future schemes
Affordable housing developer Pocket Living has secured a £19.3m debt facility with Pluto Finance, Green Street News can reveal, secured against its recently completed Addiscombe Grove asset in Croydon.
The agreement represents Pocket’s second funding partnership with Pluto Finance, which is a 12-month facility structured by Lexi Finance.
The deal will accelerate the deployment of the funds to support the delivery of Pocket’s future schemes, providing homes specifically for those looking to get on the housing ladder.
The 153 homes at Addiscombe Grove are delivered as a joint venture between Pocket and housing association Optivo. The 112 one-bedroom Pocket apartments are available only to first-time buyers who live or work in London and earn under the Mayor of London’s income threshold for affordable housing.
Alongside its pipeline in the for-sale market, in December Green Street News revealed Pocket Living was embarking on its first build-to-rent scheme in its biggest project yet, a 430-home project at Atlas Wharf in Old Oak.
Speaking to Green St earlier this year, chief executive Marc Vlessing outlined Pocket’s expansion plan, targeting 400-500 Pocket homes for sale and 400-500 homes for rent every year across London, as well as building out into the regions.
Commented on the latest funding deal, Paul Rickard, chief financial officer at Pocket Living, said: “This £19.3m funding agreement marks Pocket’s second deal with Pluto Finance and demonstrates their confidence in us and our model, as well as the need to continue delivering homes for those who otherwise might not be able to get on the ladder in their local area.
“We recently completed our 1,000 th home at Addiscombe Grove in Croydon and, with the support from providers such as Pluto Finance, we look forward to delivering many more much-needed homes across London and beyond.”
Greg Dunne, lending director at Pluto Finance, added: “This second exit bridge loan with Pocket Living further shows our belief in their model and product but also strengthens our relationship with them. At Pluto we pride ourselves on repeat business with our clients, helping to deliver a flexible and efficient service for all their funding requirements.’’
This deal follows Pocket obtaining a 12-month £6.6m debt facility with Pluto Finance in September 2021, which was secured against its Harbard Close asset in Barking.
Read the original article in Green Street News here.
October 21st, 2021
If we truly want to boost rental supply, we need to widen access to finance options
Over the past 18 months, the UK build-to-rent industry has grown exponentially, with a wall of institutional capital flooding into the market. Big names you’d expect to see such as Legal & General, Grainger, Macquarie and now Lloyds have been joined by less likely entrants such as John Lewis, who are reportedly looking at their entire retail portfolio as a build-to-rent opportunity.
With the promise of long-term income and rising demand for rental homes, it is not hard to see why many more are keen to enter the market. Savills data shows a record year of investment into build-to-rent in 2020 of £3.5bn and over £2.2bn so far in 2021.
But to tackle the endemic imbalance between the supply and demand of homes, plots of land of all sizes – not just those that entice the institutional players – must be unlocked. This is where small to mid-size developers come in.
Making financing more efficient
Until fairly recently, anyone other than household names would have struggled to obtain competitive finance for build-to-rent schemes. However, an increased number of lenders have entered the market this year as build-to-rent becomes an established asset in the UK property market.
Though this is a step in the right direction, there is still a huge disparity between the finance options available to the larger and smaller players in the build-to-rent space.
Large build-to-rent developers borrowing £50m or more per transaction can access facilities where the one loan covers the three phases of development, stabilisation and investment, with the interest rate ratcheting down according to the phase of the cycle (and the associated decreasing risk).
“There is still a huge disparity between the finance options available to larger and smaller players”
Smaller build-to-rent developers with a similar risk profile don’t easily have access to this type of product, despite there being a clear demand for it.
These operators tend to need to use one lender for development finance, another for the investment phase, and occasionally a third to bridge the stabilisation period in between. These refinances mean a higher cost of borrowing; add time delays; increase uncertainty; and can ultimately break the viability of a project.
To boost SME housebuilders producing build-to-rent assets, especially in secondary and tertiary towns, efficient financing through one loan covering all stages needs to be more readily available. If we are to start truly boosting rental supply in this country, SME developers must also be catered for in a similar fashion to the institutional players.
“Smaller developers can deliver schemes quickly, gradually boosting local capacity and supply”
Developers focused on sites with 150 or fewer units deliver schemes in towns and locations the institutions won’t touch. They can also develop these smaller schemes quickly, gradually boosting local capacity and supply. They don’t tend to suffer the same issues as larger schemes, which either need to be phased or risk over saturation in one area.
Many lenders are keen to support these smaller developments but will require a developer to switch between products or internal funding lines, rather than offering a bespoke funding package to cover the asset’s cycle from the start. This creates uncertainty, higher pricing and increases risk.
Levelling up in action
An added benefit to funding partners is that these smaller build-to-rent schemes, often 150 units or less, tend to stabilise quickly and don’t tend to suffer from the same issues as larger schemes that can flood markets and take longer to reach full occupancy. They also tend to be built with the potential sales of individual dwellings in mind, meaning there is a ready alternative business plan.
At a time of rising inflation and material shortages, it is vital that those in the SME build-to-rent space have sufficient access to cheaper capital to tackle the ongoing shortage of quality rental spaces.
Often when the phrase ‘levelling up’ is used it is not clear what it means. However, in the build-to-rent space, it is clear. To level up, the market needs to provide a wider range of more competitive funding options and empower smaller developers to help tackle the shortage of rental homes.
Read the original article in Green Street News here.
July 6th, 2021
Scheme in city’s Chinatown will include 154 flats
What: Essex Street’s £30m loan for a residential building has been approved
Why: Lender Fortwell Capital targets high specification residential and commercial schemes in key regional cities
What next: The project incorporates low carbon design features, communal spaces, and other amenities that fit the post-Covid environment
Property developer Essex Street has obtained a £30m loan from Fortwell Capital for the construction of a 28-storey residential tower in central Birmingham. Dubbed South Central, the new building will have 154 apartments for private sale. The 88-metre tower is in the city’s Southside District. Fortwell’s decision to grant the loan is part of its strategy to target high specification residential and commercial schemes in key regional cities, where demand for contemporary living is high. South Central incorporates low carbon design features, communal spaces and leisure and lifestyle amenities that fit the post-Covid environment.
The team in charge of the development previously delivered two of the tallest residential towers in the city: Bank Towers I and II, both of which are on Broad Street.
Fortwell Capital associate director Nick White said: “The team behind South Central has a clear vision for the scheme underpinned by their development expertise and understanding of the evolving demands of the local market. It’s an exciting time to be lending into Birmingham on schemes like South Central, which offers a range of exceptional accommodation aligned with the long-term growth prospects of the city.”
LEXI Finance advised Essex Street on the transaction.
South Central joins the pipeline of residential projects planned for Birmingham. In June, Apsley House Capital applied for a 530,000 sq ft development in the city, hoping to complete the project by 2025. BPG also sought planning permission for a 11-storey scheme on Birmingham’s Gooch Street North.
Read the original article in Green Street News here.
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