24 Apr In conversation with LDNFinance
As part of our innovation in uncertain times series, we sat down with Anthony Rose, Director of LDNFinance to learn how the team’s approach has changed and evolved to withstand the Brexit uncertainty. Take a look at what he had to say in our Q&A:
How has your approach changed to accommodate for the evolving market conditions?
The evolving market has meant that we work very closely with clients to try and find solutions to deals through innovative structures. This can be via high leverage funding through family offices, increasing the number of deals using mezzanine finance or through a focus on acquisitions of land which do not have planning permission. Many brokers struggle to secure funding for these types of projects, but our experience and connections have allowed us to meet investors who have appetite and can see the true value of these sites.
We find it crucial to be involved with projects at a very early stage where we can assist in packaging the deal correctly and working through financial appraisals to ensure we find the right finance partner.
We also pay considerable attention to the exit and look to assist developers by either providing mortgages for their purchasers if they are selling the units to the UK market, or we look to refinance the development onto a long term solution, especially where developers have worked in an area which has a high rental yield making higher leverage easier to achieve.
Do you think that developers are driven or deterred by the lack of clarity around Brexit? Why do you think this?
The majority are deterred by Brexit due to the uncertainty it is causing or have at least deviated from their previous strategy. Whilst challenges currently exist for developers there are also opportunities to obtain sites at an improved value whilst other firms hold back from the market. Developers always want to add value to a deal, and this may be possible if they manage the project over a longer time frame or by phasing a project to reduce the risk. This way they can continue to add value whilst the market settles and confidence grows.
Are there opportunities for brokers to ‘innovate’ in order to make the most of the uncertainty?
With the changing market, brokers should focus on upskilling their expertise and knowledge base. Many brokers are providing an excellent service for their clients on vanilla transactions, but the key thing for a broker to differentiate themselves from their peers is to be able to show their expertise in structuring and financing the most challenging deals. It is important for any residential mortgage broker wanting to move to the specialist finance sector to go through the right training to understand the complexities of the industry and to acquire the right skillset to be able to assist with the complex transactions. This can be done by working alongside a more experienced Specialist finance broker.
More importantly, as a broker, we need to be satisfied that whichever lender we approach to fund a development deal will have the funds in place throughout the project to ensure, not only, completion of the project but the ability to fund it through the sales process too. Relationships with well-established BDM’s and their funding lines are worth their weight in gold when the market hardens!
Have you seen any noticeable (and positive) changes in the market which have been driven by the current conditions?
The greatest change we have seen in market is the diversification of bridging lenders. With the combination of both stable high street lenders and diverse new entrants, lenders have expanded and created certain niches for themselves, whether it is through speed, high leverage, quirky property types, no credit score or no valuation/legal fees. Some of the larger development funders are now targeting larger loans only and have raised their minimum loan size as they consider smaller and larger projects to be the same amount of work and therefore, they can get more value out of the larger projects.
What do you think is the next biggest opportunity in the market?
The bridge to sell market will remain strong for the next year until the number of transactions and speed of purchasing increases. We see opportunities emerging in Pre-planning acquisition finance, where developers are hoping to take advantage of improving values of development opportunities where the market will continue to recover while they spend time in the planning process. Once planning is approved, and the sites are built out they should be selling their units in a market that is more buoyant.