Completion is only the beginning…

Towards the end of 2022, developers found themselves facing a multitude of problems. Material shortage drove the costs of developments higher and higher alongside rising interest rates resulting in even contingency funds no longer being sufficient to cover expenses. As we entered 2023, these shortfalls continued to get worse. Costs have continued to rise amid the highest inflation rate in 40 years and forecasts show that figure could reach up to 18%. Even now as we finish out Q1, the base rate has increased to 4.25% rising by 4.15 percentage points since December 2021, the most aggressive tightening of UK monetary policy for decades according to the Financial Times.

As challenges continue to rise, it’s resulting in the right finance becoming harder to obtain and even harder to keep. We are seeing this trend with a notable increase in enquiries for our Part Complete Development product; designed for us to step in and support borrowers at any stage of a project. Requests for PCD have increased by 46% in 2023 when compared to the same time period in 2022, signalling that the need for refinancing and alternative options mid-way through schemes has risen. 

So, it’s important to ensure the finance you secure continues to deliver throughout the life of the loan. An increasing number of our brokers are raising more questions about the post-completion process on behalf of their customers, suggesting that it’s becoming more of a priority in the decision making process for choosing the right lender. Anecdotally – and reaffirming this trend – a recent broker approached us with an urgent refinance request after their client had to wait seven weeks for a drawdown. Having full confidence in the delivery of the entire loan life, from start to finish is therefore becoming paramount in the conversations held at the front end in order to reduce the risk of running into unexpected barriers further down the line.

 At Avamore, the importance of Asset Management has never waivered. Building a strong team has always been a priority for us and this can be demonstrated by the fact that both ends of the spectrum are equally balanced as we have the same number of Asset Managers as Relationship Managers. 

Furthermore, our team has evolved having taken an active approach to managing schemes by allowing borrowers to have an open line of communication with their lender throughout the entire process and giving full comfort that we aren’t just looking at projects as numbers on a screen. Each of our Asset Managers conduct regular site visits to get to know the developer’s project in as much detail as possible, allowing them to be solution focused if and when challenges do arise. 

This approach has set a strong foundation for our entire business; across the £550m+ we have lent to date, we have suffered no losses against all redeeming loans and even in the most challenging markets, continue to oversee successful exit of transactions from the book. We use communication, transparency and the tools available to ensure that our borrowers feel like we are working as a team across the project lifecycle. 

So while some may feel that completion of the loan is where the work is done, we believe that’s when it’s only really getting started.