Speaking to Specialist Lending Solutions, Chris Daly, managing director of the structured real estate division, said the division has been “well-received” by the market.
“What we are offering at the moment is an adjacent product to the core bridging business. It looks and feels very different and the way we deliver it and underwrite is completely different, but fundamentally people get that Glenhawk is a short-term lender.
“So going, look, we now do short-term lending, but it is big and complex, [which] means that we have a warm reception with lots of people that like and know us,” he said.
He added that while there was £500m in terms issued, there were multiple deals in front of the credit committee currently, and the target was to transact in excess of £50m by year end.
Daly noted that the lender had recently got funding from a Japanese investment bank, and it was “planning to fill up in the next three years”.
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He said the response has been “really positive” and it was “winning deals… in what is a relatively slow market”.
Daly explained that the slow market was partially due to “borrower indecision” as financial news around the base rate and inflation has led some to adopt a wait-and-see approach.
“We’ve got lots of terms out there where we’ve been told that… we’re the winner, and we’re going to win the deal as soon as the broker gets the commitment from the client and that’s just lingering,” he noted.
When asked about the kind of cases that were coming across the desk, Daly said there were a lot of development exits as properties are taking longer to sell and borrowers need another 12 months.
Another key area was land loan deals for large schemes, and it was tending to focus on London and the South East.
Other areas include helping borrowers “reposition and replan,” so turning them into Build to Rent, co-living or purpose-built student accommodation (PBSA), where yields are more “attractive” and have a “better exit yield”.
He added that it was also getting a lot of Building Safety Regulator (BSR), now known as Building Control Authority, approval business, as well as prime and near prime London cases.
“We love doing the £250,000-1m loans that we do, but you can end up pedalling faster and faster and faster on those deals and it’s a limited market. The pie isn’t really growing, and we’ve taken a pretty good chunk of that pie.
“In some cases, you’ve got to go find a new pie, and so we looked at the market and when I looked [at] where we were… we don’t come up against that many competitors in our space, especially when you go £10m-plus. We knew there was an opportunity, you only have to be better than two or three lenders, but in the £200,000 bridging space, there might be 50 lenders. So, smaller competition, but it is a big market,” he said.
He said the division currently had two employees, including himself, but he wanted to keep it “purposefully compact because it is big ticket and much lower volume”.
Daly said: “At the moment, there [are] two of us, which is already not enough, but we only want to bring the right people in at the right time. We are looking for people, but if I’m really honest, as a mature division, I see this being maybe three directors with a team assistant relationship directors underneath that. I would rather have quality over quantity.”
When asked about whether other lenders would consider entering this area of the market, Daly ruled it out.
He explained: “Other short-term lenders are not funded in the way that we are, not many short-term funders out there have a US fund backing them plus institutional funding lines from major international banks.
“That means that we can do the bigger ticket stuff without it scaring us. If a small lender has a £50m balance sheet and goes and lend[s] £30m and gets it wrong, it is game over. We can ride that risk all day long, so I don’t think you are going to see other bridging lenders going into that space.
“I don’t think the banks are going to do it, because banks don’t really understand bridging, or they try [to] apply a term lending mentality to bridging. They can do the bigger ticket stuff, and they have the funding, but they don’t want to. They’d rather go through asset finance or something else, and then the other guys that are big ticket-focused… they just want to do development funding, and will do land so that they get to do the development, but don’t have any interest in doing four or five houses in Notting Hill or anything like that. They are experts, but they’re experts in a different area, so I don’t think they’re about to come into our space.”
“We are a single real estate finance specialist from start to finish. We’ve got the money to lend, and we don’t have to ask anyone’s permission to do it. It is genuinely structured deals, we’re not criteria-led tickbox-heavy, we can lend on these assets to these people at this leverage, everything else I can pitch.
“One of the big things that people love, beyond all the different asset types that we can do that others can’t, is we lend on open market value rather than 180-day, which in the short-term space is quite rare as well,” he said.
