Debt markets are open and busy for real estate developers

By Joe Dyke, Head of Real Estate Finance UK at Clearwater International

The fog of an extended period of political uncertainty has been somewhat lifted following the decisive general election result in December. Anecdotally, we are seeing an uptick in activity in 2020 with developers and investors, in particular residential and mid-box industrial, looking to secure and progress sites.

National and local government are both focused on delivering more new homes. Andy Street, Mayor of the West Midlands, has been lobbying the Government to increase funding for affordable housing. Industry press is regularly reporting on planning progress for ambitious and exciting schemes in the West Midlands. The environment feels positive and improving.

In more good news for real estate developers, debt markets are strong with a wide range of finance providers looking to support development activity, including challenger banks and specialist funds. Shawbrook and Oaknorth have both been growing their teams in Birmingham, which is fantastic for the whole of the Midlands. Specialist London based real estate lenders such as Maslow Capital remain active in the regions. Big, institutional players like Goldman Sachs are funding large residential schemes. It is an increasingly competitive lending environment meaning access to capital in itself should not be a barrier to a developer looking to deliver a quality scheme.

Every scheme is different with its own set of challenges and opportunities, consequently, borrowers will have their own specific requirements. This is where the market knowledge and structuring capabilities of a specialist debt advisor can prove valuable. A debt advisor will help ensure the structure and wider terms are best in class and identify which lenders have appetite for a developer’s specific requirements, such as bespoke requirements for a JV partner or seeking an advantageous position on guarantees. Some lenders can flip a development loan into a term loan, others can’t. Loan to cost is available at 90% plus but getting the broader negotiation right is critical to ensure a successful project is delivered.

Clearwater International’s Debt Advisory team has wide experience of delivering real estate transactions, most recently advising Autograph Homes on raising a development finance facility from Shawbrook for a housing scheme in Bristol.