Advisers must ‘be mindful of where lenders see risks’ in short lease, high yield market

The call came as part of a debate on how the commercial property finance market was evolving with the changing economy and underlying lifestyle trends.

The advisers also noted that permitted development conversions of offices to residential were driving growth in shared workspace projects.

Clients know the risks

Speaking on Specialist Lending Solutions Television in association with Aldermore, Sirius Property Finance co-founder Robert Collins said brokers needed to be aware of lender’s risk appetites and market views which could have implications for their other decisions.

“We need to be mindful of where lenders see the risks, and when clients come to us with a proposal, we need to be early in the piece telling them what the finance issues may be,” he said.

Collins explained how one client had been forced to change plans because lenders were not going to be willing to re-finance the property despite holding a strong lease with Boots.

“So it’s really making sure that clients know where the risks are from the lending side,” he continued.

“I’m always conscious that we don’t give tax or investment advice, clients make their decision and then we’ve got to wrap the best financial options around it from there,” he added.

Higher yields, different underwriting

Coreco partner for specialist finance Matt Yassin agreed that lenders were adapting to developments in the economy, lifestyle trends and how leases were changing.

“I think you have to consider the advent of technology in today’s world, the flexibility it provides, and the knock-on effect in regards to commercial property,” he said.

This he noted was coming to the fore with shared working spaces where yields were higher for investors, but the underwriting has to be looked at differently.

“It’s more of a case of how can we match that flexibility which individuals have, from a lending perspective,” he continued.

“You’ve got all sorts of new proposals, places being made for people to share and we need to know how to look at the numbers from a lending perspective.

“That has an impact on the investors, but again it’s down to the brokers and the advice that we give to make sure that’s transparent all the way through to the lender.”