The property development finance sector has suffered at the hands of the recession in a similar way to the residential mortgage sector and the lack of funding has meant that a number of property development opportunities have failed to be realised.
Although since 2009 there has been something of a resurgence in the desire to borrow, adequate funding is still largely unavailable. However it is fair to say that over these last few years, United Trust Bank was one of the few banks both able and willing to lend to property developers. In fact, our track record of helping intermediaries find funding for their clients’ residential property developments stretches over the past 10 years.
Our business has continued to grow mainly due to our flexibility to find funding solutions that match the realities of the current economic environment. There is little doubt that in specialist financing, a tick-box mentality will not assist intermediaries in securing for their clients not only the required funds, but most importantly, the correct structure and term of the loan.
Intermediaries are highly adept in recognising where innovation is required, and there is an increasing pressure on lenders to recognise and respond to changing needs.
At United Trust Bank we have recognised that property development finance does not sit in isolation from other products, and products such as our bridging loans are now being looked at to complement and facilitate a development opportunity.
Just as intermediaries are skilled at finding financial solutions, property developers are skilled at spotting development opportunities. Property developers are particularly adept at spotting an existing house development potential. Their experience and expertise can identify opportunities to perhaps develop additional plots in the garden or alternatively knock down the property and re-build to maximise the return from the land.
However, the first hurdle is often the acquisition of the property and this is where bridging and development finance can be natural bedfellows. Intermediaries can approach us to obtain a bridging loan in order to purchase the property. Our pragmatic approach to criteria allows for a bridging loan to be based upon the existing habitable property where the purchase price adequately reflects the current market value. An alternative exit is essential and may be refinancing through the Buy to Let market, should planning ultimately be refused. Whichever route is utilised, the property can be secured and permission for development sought.
Once planning consent has been obtained, we can look to assist the developer with development finance. This ‘bridge’ to enable a development to be funded is one of the many adaptations in the market arising from the desire of lenders and intermediaries to innovate and find the right funding for the right project. We have already helped intermediaries with similar schemes and have several others under consideration, demonstrating an ability to provide a complete ‘one stop’ offering.
Furthermore, our own experience has shown that even within distinct product types, there is a requirement for a product range sufficiently broad and flexible to provide solutions for the wide range of propositions presented by intermediaries and their developer clients.
It is our firm belief that as the current challenging market environment continues, there will be an increasing need for lenders to work closely with intermediaries to develop new and innovative funding solutions. These will include using different product types and structures over the course of a project. Our close working relationship with intermediaries sits at the heart of our ongoing product development and will continue to do so.