Bridging Introducer: Mipim debrief
Mipim 2016 is now a distant memory and the hard slog that is the most anticipated and attended property conference of the year was, in my opinion, a success for the short-term lending market.
I have made the trip to Cannes for the past three years. My first came as a shock, even though I had been given a thorough briefing by a number of parties.
There are some that will have you believe that the week is an excuse for property professionals to enjoy the south of France sunshine and catch up with contacts while sipping champagne and rosé with no real focus on work.
This may be true to a point, but the amount of business being done there is clear to see. I do believe you get out of it what you put in and while I am sure there are some that see it as a jolly up, for me, this year in particular was very useful.
I have come home with two live deals, one of which is closing in on completion and will pay for future trips for the next five years or so. This deal came about from being a guest at a lunch hosted by a law firm that I know well. I happened to be sat opposite one of their clients who was struggling to secure bank debt in time to fund the purchase of a short lease property.
We are now putting a bridge facility in for six months against the purchase. It simply was a case of being in the right place at the right time.
I think that is one of the key and beautiful things of Mipim. Being there and talking to people freely to discover what they do leads to opportunity.
The ability to then act on the opportunity is down to the company and individual of course, but if you are not there then you will never have the opportunity. Obvious statement I know, but it’s this simple fact that makes me hold the week in such high regard.
Focussing on the lenders now, the number of short-term bridging lenders attending has increased in the last three years substantially. They are also hosting fantastic lunches, dinners and drinks events that are comparable to the solicitors, surveyors, big banks and private equity funds.
The confidence that this displays is fantastic and is helping the short-term market to be taken seriously within the wider financial market. The numbers have been growing, specifically the amount of money being lent, at an eye watering rate over the last few years as we all know.
But I think there was still a certain snobbery being held by some in the wider, more traditional finance world.
However, this year that seems to have almost vanished. Perhaps the general coverage in the press coupled with more regulation coming in is the true driver for this opinion.
But, events such as Mipim are definitely contributing. The exposure and the perceived success the industry is having by the large presence of lenders attending is most certainly contributing.
Bridging and short-term loans make up a small part of what we do, the development and large investment requirements dominate. Through the relationships that we have with the lenders that operate in these areas I am told that the reputation of the bridging and short-term market has changed massively.
It is not seen as last ditch, expensive finance any more. It is seen as a tool to unlock certain deals and as a potential saviour of a banks deal. I have looked at a number of deals in the last six months where we are taking out a development facility that was funded by a private bank and then referred to us to finance after the works have completed.
The development period has run over and they wish to repay the lender but hold the property for a few more months to be able to sell for the right price. A bridging facility is a win for all parties here. The lender gets repaid on time, the client buys himself more time to sell for the correct price and a lot of the time the rate is also reduced, and of course the bridging lender funds a deal where the only risk is a sale.
This is mitigated by a relatively low LTV, say 60% – 65%. Deals such as these and the exposure the bridging world receives from them again is helping to raise the profile and help it to compete with the bigger banks.
Mipim may be a time to enjoy a few glasses of rosé and catch up with old industry pals and acquaintances.
But business is being done and from what I have seen this year the short term bridging market is making up a huge portion of this. Being seen in Cannes is important for the industry, but so is following that exposure up with business. For our industry, business is good and so too was Mipim.