Deals from the specialist lending shop floor – Coreco

by: Matthew Yassin, partner – specialist finance at Coreco Group
  • 23/04/2018
  • 0
Deals from the specialist lending shop floor – Coreco
As quarter one passes and the season turns its attention to warming the streets, it’s appropriate to reflect on the colourful specialist lending market that seems to be blooming in the spring sunshine.

 

 

While there are a lot of changes that may threaten to stem the momentum of the market, at present the specialist lending sector is thriving.

With the regulated market staring longingly at the freedom which the specialist side has, there seems an uplift in activity, specifically around the bridging and limited company lending sector.

For me, being able to fund large developers who have gained the planning rights to a particular scheme for 100+ units shows us all the London market is very much going in the right direction.

I find myself financing these transactions through dedicated development lenders within cost expectations given the relatively low interest rate environment.

 

Multiple options

Schemes such as a £55m gross value development at 65% loan to cost have had terms fully offered.

The current market also allows me to offer my client an exact comparison for funding via an alternative structure; this being a joint venture lender who will happily take on the project without any further financing from the client.

It would position the project as a joint venture with a 10% coupon  – the annual interest rate paid on a bond – and 25-35% profit split at the end of the scheme.

The land has been purchased already by the client for £2.5m and the attraction of such a proposition is of course cash flow, golden words to any developer if this can be protected.

We expect to break ground on the development in June and conclude in 2022.

 

Golden arches

Other areas which are of interest include Network Rail apparently keen on selling off arches throughout the country.

This is opening up many opportunities for businesses, and as a result for specialist lenders to provide the funding, and I find myself with two propositions on my desk currently.

There are however some caveats here as the leases which Network Rail are issuing may prove prohibitive.

The devil is very much in the detail, but I will expand on this in the future.

 

Consistent variables

Going forward, the trends of the specialist sector seem to be consistent throughout most lenders, with each generally staying to the expected parameters.

As an example; the bridging lenders are consistent on loan to values with variation between them only evident with preferences on property types, client profiles and pricing.

For instance, I have recently completed a bridge for a commercial property which had an overage  – the amount by which a sum is over a previous estimate – is attached to it.

We had all the numbers from the Greater London Authority giving us a projected overage figure, without being formally confirmed.

The original lender just could not get comfortable, even though we offered a retention of funds for the amount of the overage.

However a direct competitor saw the calculated figure and was happy to issue the loan.

These differences are really what makes the specialist lender section very intriguing as the variances are hard to spot even for experienced brokers.

The beauty of this section of the market is that feedback is regarded, considered and applied after the event, due to the nature of the business in terms of the risk and reflected pricing.

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