There is no doubt for Fortwell Capital, business is good. Only in October the high-value real estate bridging lender provided more than £50m of funding to developers in a single week.
One of the deals was a £30m financing arrangement for a mixed-use development scheme in the London Borough of Hackney, another a £7m refinance bridge for a high-end residential development in London’s Battersea – projects, some others would have been watching with scepticism since Brexit has taken its toll on property investment in the capital.
“There have been many people following Brexit that took a step back and decided not to do much lending until the market [stabilises]. Many banks have said it feels too risky to make any long-term decisions about their lending,” said chief executive Colin Sanders (pictured).
“But we understand the development schemes we are lending to and we always take the view on any development we support that, if we understand the development and construction risk and are in a position to understand what the worst case scenario would be, we are happy to support the developer,” he added.
No ordinary lender
Fortwell is no ordinary bridging lender. Financially backed by parent company CPC Group, an international real estate development and investment company, the firm favours big ticket transactions. It also deals in premium buy-to-let, development and structured finance. Fortwell typically lends between £2m and £5m in one transaction, sometimes more.
However, it has not always been that way. Fortwell started out in 2011 as a pure bridging finance provider with average loan sizes of £0.5m to £1m. The market had become “overheated”, said Sanders, whereas the high-value short-term market was “underserved”.
Since 2011, Fortwell has completed about 400 property funding transactions worth a combined £1bn. The final quarter of 2016 brought a flurry of new business which amounted to a total of £80m in completions, the firm said. It is forecasting a further £100m of completions in the first quarter of 2017.
A change of strategy
However, Fortwell too has felt the impact of a changing market this year. In particular, the effects of the 3% Stamp Duty surcharge on second homes introduced in April, the announcement of cuts to landlord tax relief from next April and the looming exit from the European Union.
“Properties worth more than £2m have quietened down,” Sanders said. “There are nowhere near the number of sales in that market and the market for high-end central London has been [stagnating] if not negative.”
As a result, the firm changed its course. It moved from high-end properties to multi-unit affordable developments with single units worth an average of £300,000 to £0.5m. “We have evolved our proposition that is why we are now in a position to support developers,” Sanders said.
“There will always be a demand for property and homes in the south east and if developers create affordable homes there will always be a demand for that. We have a number of interesting opportunities in the pipeline, all in the south east of England,” he added.
Besides, add Sanders, Fortwell had found itself a comfortable niche. “We believe banks are still slow on [lending] which helps specialist lenders like Fortwell Capital. There is not a huge amount of competition for us at the moment,” he said.