Blend: Developers need expert relationships and larger loans
As a result of the pandemic, property developers are increasingly aware of the need to work with specialist lenders which have experience with complex deals, according to Barney Iles (pictured), lending manager at Blend Network.
Iles said that at the height of the pandemic, in March and April last year, the development finance market was focused on service, being by borrowers’ sides and supporting them through uncertianty.
However, as the pandemic has ebbed and the market started to recover, Iles said developers’ needs have shifted, and they have started to look for lenders that understand the intricacies of the development process, and which could fund accordingly.
Part of this approach includes a growing interest in higher gearing and larger loans, as well as a shift to working primarily with specialist lenders.
Iles said: “Ultimately, developers needed higher gearing and wanted to work with lenders who were able to offer them higher loan-to-gross-development-value [LTGDV] debt.
“Compared to last year, we’ve doubled the GDV of the loans we fund from circa £5m to £10m now.
The pandemic, according to Iles, allowed Blend Network to build stronger relationships with existing and new borrowers, because this period allowed developers to see which lenders would provide during difficult times.
He said: “I also feel that specialist lenders, as nimbler and more agile organisations, are able to adapt much quicker and respond to the changing needs of property developers, compared to larger traditional lenders and banks.”
He added: “It makes sense really; would you go to the supermarket to buy a car? Would you go to a department store to do your food shopping? You wouldn’t, right? You’d go to a specialist shop to buy what you need.
“So, it also makes sense for property developers to go to specialist lenders to fund their property schemes.”
Iles also pointed to the recent trend of converting offices and commercial buildings for residential purposes, which many have said could help ease the housing supply crisis somewhat.
He said: “For example, we recently funded the conversion of office block into 30 flats in Great Yarmouth and the conversion of an old Victorian shoe factory into 24 flats in Northamptonshire.”
Another trend he expects to see is the industry moving towards regulation.
According to the Association of Short Term Lenders (ASTL), regulated bridging loans account for around 13% of the market.
Iles added: “The good news is that we are gradually seeing borrowers demanding to work with regulated lenders who offer trust and transparency within a regulated framework.”