Fiduciam secures £400m funding
Interest rates now begin at 0.55 per cent a month for bridging loans, 0.57 per cent a month for permitted development and conversion loans and 0.61 per cent per month for ground-up development loans.
The lender said it expects demand to be strong for its commercial and development loans this year as the economy recovers and projects which were put on hold resume.
Fiduciam’s loans range from £250,000 to £25m and have a term of six months to three years. Lending is available up to 75 per cent loan to value (LTV) for residential property and up to 65 per cent for commercial property.
Last week, Fiduciam announced it had expanded into Scotland as it saw the region as a “key target” for 2022.
Jake McCausland, heading Fiduciam’s development lending for the UK and Ireland, said: “Our 2022 development pipeline is very strong, and the large number of repeat borrowers we see is a testament to the service we are able to offer.
“The new interest rates and LTV parameters will allow us to build on this and establish ourselves as a leading development lender.”
Johan Groothaert (pictured), CEO of Fiduciam, added: “The additional £400m of funding now available to be deployed in 2022 is a strong vote of confidence by our institutional funding partners, both in the economy and in Fiduciam as a lender.
“We are expanding our lending operations across all markets, the UK as well as Spain, Ireland, the Netherlands and Germany. 2022 promises to be a very busy year and we look forward to assisting as many entrepreneurs as possible to turn their projects into reality.”
Fiduciam cuts rates and details its Scotland expansion
At the same time, Fiduciam announced that it was offering new, lower interest rates starting at 0.57 per cent per month for bridge loans and non-ground up projects. Rates for ground-up developments will start at 0.61 per cent per month.
Fiduciam’s case manager Louisa Willoughby said “Scotland is a growing market for specialist finance and a particular focus for Fiduciam for 2022.
“Historically Scottish businesses have been underserved, with limited options for more complex property finance – from time sensitive bridge loans to development finance for family housebuilders. Fiduciam’s expertise of lending in a variety of European jurisdictions, including Spain, France, Germany and the Netherlands, means that Scotland’s distinct legal system poses us no challenge.”
Johan Groothaert (pictured), Fiduciam’s chief executive, said the lender’s Scottish team had been set an “ambitious origination target” and as “local knowledge is at the centre of good lending” establishing a specialist team for its Scottish business was a “natural next step”.
Fiduciam also said its interest rates in Scotland remained fully aligned with those offered in England and Wales. The company issues loans secured over real estate in the United Kingdom, Ireland, Spain, the Netherlands, France, Germany, Belgium and Switzerland in pounds and euros. The lender said that typical loans were between £250,000 and £25m with a maximum loan to value of 70 per cent for residential properties and 65 per cent for commercial ones.
Fiduciam scores best month of lending in October
Its largest German deal – a €3.5 transaction to a real estate investor – contributed to the total loans arranged during the month.
The transaction was a refinancing of an acquisition loan for part of a portfolio of properties containing multiple asset classes at different development stages.
The company has continued to grow appointing 25 staff this year. It now wants to hire additional case managers, underwriters and operations staff to help meet its 2020 growth targets.
Johan Groothaert (pictured), chief executive, said: “The void left by the traditional banks means that demand for our loan product continues to grow across the UK and European jurisdictions in which we lend.
“Our pipeline is very strong going into the end of the year and further consolidation in the marketplace lending sector will put us in an excellent position entering 2020.”
More banks could be forced to re-weight portfolios like Metro – Fiduciam
As an alternative lender we were in a good position to observe some interesting developments in the commercial buy-to-let market over the past three years.
For example, in 2015 the majority of the bridge loans Fiduciam provided were related to buy-to-let. But progressively during 2016 and 2017 we lost this business as the challenger banks, including Metro Bank, became more aggressive in this segment, offering substantially lower interest rates.
This was incomprehensible to us as the international banking regulation framework, Basel III, requires a substantially higher risk weighting for commercial buy-to-let loans than for residential mortgages.
Basel III increased these risk weightings following the financial crisis to ensure that banks have sufficiently strong capital buffers when they have to write down loans during recessions and continue to have the confidence of savers at all times.
Eight per cent interest needed
According to reports, Metro Bank had erroneously put a risk weighting of 35 per cent on its commercial buy-to-let mortgages, which it had to increase to 100 per cent, as required by Basel III.
Considering the Basel III risk weighting and capital requirements framework, and assuming a 70 per cent cost-income ratio, which is an average for the UK bank sector, we have calculated that a bank would have to charge interest rates of approximately 8 per cent per year on commercial buy-to-let mortgages.
This would achieve a return on equity of 20% which would be a fair expectation set by bank shareholders.
Basel III did open a window for alternative lenders such as Fiduciam, which are financed by institutional risk capital rather than bank deposits or bank funding lines, to enter the commercial buy-to-let market, thereby reducing the demand on banks to provide such commercial buy-to-let mortgages, and consequently to lessen the risk on banks’ balance sheets.
More risk re-weightings to come?
We now understand better what has happened, at least at Metro Bank, however questions remain. Some challenger banks continue to offer very low interest rates on commercial loans, which appear to be inconsistent with Basel III.
As an international lender we also observe that Basel III is implemented differently across the E.U., which is hard to understand considering there is an EU regulatory framework.
For instance, in the Netherlands a low risk weighting for commercial buy-to-let loans is standard, fuelling a frothy real estate market.
Finally, we notice an increasing number of challenger banks are lending to alternative (non-bank) lenders at low interest rates, which raises the question how those funding lines are risk weighted.
Metro Bank has tackled its Basel III risk weighting issues and has since raised more than £375m in equity, assisting in a recovery of its share price, but based on the above observations the question arises whether we will see similar risk re-weightings in the wider challenger bank sector and even internationally.
Fiduciam funds vineyard in France with wine as security
The three-year loan was structured as a multi-drawdown facility of €3m with an initial drawdown of €750,000.
Fiduciam took a charge over the vineyard, but in addition it also took security over 77,422 bottles of wine and 2,631 hectolitres of wine in barrels.
The loan was taken out by a Luxembourg company, principally owned by a high net worth individual from the United States who had purchased the vineyard several years ago and now needed to refinance some existing debt of the vineyard.
The vineyard produces a biodynamic wine, with solid distribution, including through Waitrose in the UK.
Fiduciam has announced it is willing to lend against in-bond wine cellars in the UK and to provide a bottle of wine to brokers placing deals with it.
Johan Groothaert, CEO of Fiduciam (pictured), said: “This deal once again demonstrates the cross-border capabilities of Fiduciam and the willingness to lend against trading businesses.
“This puts us in a fairly unique position, particularly that our loan IT platform can deal with loans of such complexity. This ability allows us to offer interest rates abroad, similar to those we would be offering in the UK.”
Fiduciam aims to double lending while preparing for potential Brexit recession
Fiduciam also told Specialist Lending Solutions it is planning for the possibility that a no deal Brexit might prompt a UK recession and there were starting to be some concerns in the consumer credit industry.
The institutionally funded lender, which launched in 2015, granted £139m in new bridging and development loans last year and is aiming to hit £250m this year.
To cater for this growth and its strategic expansion plans, Fiduciam intends to hire 25 additional employees including case managers, underwriters, business developers and loan servicers.
The UK-based operation conducts a range of lending including exporting foreign currency bridging lending across Europe from deals completed by brokers in the UK – often with UK developer clients.
It also lends to domestic SME businesses for a variety of reasons and needs, using property as security.
Fiduciam CEO Johan Groothaert told Specialist Lending Solutions the firm had begun mitigating the potential fallout from a Brexit-induced recession.
“We’re staying clear of the biggest potential Brexit impact areas, such as the hotel sector,” he said.
“We’d like to see more business from manufacturing firms – our focus is moving into that area but we’re not seeing the demand coming through yet.”
Groothaert also noted that if Britain’s property market did stagnate or contract it would focus growth plans across Europe instead, but added: “We can continue to lend if there is a Brexit-related recession.”
The growth is planned to come primarily from increasing volumes in the current markets, but the lender also intends to enter two additional countries in 2019 and to open two new offices, one in the UK and one overseas.
It currently has a London hub and Netherlands office in Utrecht.
European targets for expansion include Portugal, Switzerland, Monaco, Luxembourg and Belgium.
‘Risk not managed well’
Head of property lending Clint White warned that there were some concerns in the overall lending market.
“There is turbulence in the credit industry – we’ve had years of a bullish market but there are signs that risk is not being managed well in some areas,” he said.
“Some locations are seeing or have seen an overheated property market including London, Sydney and Hong Kong already, while Amsterdam and Dublin are a couple of years behind London.”
However, White emphasised that the lender had sought to tackle these with a diversified loan book.
“This year promises to be a more challenging year for the lending industry in general, with widening credit spreads, falling real estate prices in certain parts of the UK and the Brexit risk, however we are confident our positioning will allow us to take advantage of this environment,” he continued.
“We believe that our growth target for 2019 is realistic, yet the primary focus remains the quality of the loan book.
“Since we started lending three and a half years ago, we have never had to appoint a receiver, and therefore while we expand, we need to make sure our risk and quality culture is not watered down.
“This means we have to spend a lot of time looking for the best candidates and providing further training.”
Fudiciam is the latest in a series of specialist lenders to reveal big growth goals for 2019 including Relendex, Glenhawk and Kuflink.
Fiduciam grants first bridging loan against French property
A spokesperson from Fiduciam told Specialist Lending Solutions that the company is looking at increasing its presence across Europe as it has already expanded in Ireland, Spain and the Netherlands.
With 34 employees in the UK at present, the lender said it was looking to recruit more underwriters as part of its expansion plan.
The company said that this latest deal in France marks the next stage of its expansion into continental Europe and was a multi-national deal, involving legal teams in the UK, France and Switzerland, which is where the client lives.
In order to develop and expand its offering the lender has hired three French case managers, all based in London.
Johan Groothaert, CEO and co-founder of Fiduciam, said international owners of French real estate often found it very difficult to obtain finance from local banks.
He added: “Only a few private banks are open to these clients and they require the clients to move part of their private banking portfolio to them.
“So we have developed a genuinely innovative structure to lend against French real estate whereby we can take security without having to take a mortgage in many cases, and our interest rates are at the same levels as in the UK.
“By lending in this way, Fiduciam is able to save its clients from paying the stamp duty and notary fees, which can be very high in France.”
Dino Wyatt, an international mortgage specialist, added that the Fiduciam product allows foreign investors in French property to obtain short-term finance against their French real estate at competitive bridging terms in a way that was not widely available until now.