Ask the expert: Specialists in development finance

Ask the expert: Specialists in development finance

BLG Finance have funded the development of thousands of new homes since 2003. The company’s Chairman, Peter Wade shares the secrets of their success with Showhome magazine.

Development finance is an ultra‐competitive market, what makes BLG stand out from the crowd?

We believe there are a number of factors that make BLG stand out from the crowd. Firstly, we are specialists… residential development finance is all that we do, it’s our absolute focus. Unlike other lenders and banks, this means each and every member of our team is dedicated to providing property developers with funding to build new homes. It’s both our mission and our passion.

Our organisational set-up brings many benefits to our customers, BLG only hires people with expertise in property development and property finance, which means developers and brokers who work with BLG are talking with people who have done this before, many times over. Our team is highly experienced, they understand the development process, both the highs and the challenges, this level of understanding allows them to best support the developer to get the project over the line.

BLG are different to many other lenders in that we fund projects right across England, Scotland, Wales and, more recently, into Northern Ireland. We have great success in regional towns and cities, and in some locations typically underserved by other lenders. To best support our customers, we employ Regional Directors and BDMs who live and work across the UK, from Scotland to the south west; our local experts are on hand to meet and assist property developers and brokers in their region.

It’s always nice to be told that we are a ‘breath of fresh air’ due to BLG being a people business. Many of our customers enjoy working with us because we take the time to meet them, to get to know them and understand their projects and their ambitions. Often these developers have struggled with a lack of customer care provided by the larger banks, BLG is different in that we put good service at the very centre of all we do. We are in this for the long run and truly partner with our customers and brokers, that’s why we are so pleased that they come back to us time and again.

How do you ensure that your finance solutions are best suited to the individual needs of your client?

Every development project is different. Consider just a handful of the schemes BLG is funding today: a loan of £11 million for 40 new homes in Manchester, a loan of £6.2 million for 104 new homes in Yorkshire, a loan of £1.4 million for 1 new home in Surrey, a loan of £2.2 million for 30 new homes in Belfast and a loan of £2.6 million for 4 new homes in Norfolk. All very different locations, different property types, different target buyers and partnering with developers who have different financial requirements.

Our team understands that a ‘one size fits all’ approach to residential development finance would not be helpful; each property development loan request is treated individually, BLG does not have a standard loan structure.

Our approach is simple, we listen to what the customer wants to achieve and then we do our very best to meet these needs using bespoke and flexible funding options. As a principal and experienced lender, we are able to structure loans to best suit the developer’s individual requirements.

BLG have now been established for over fifteen years. Could you just talk us through the evolution of the company please?

BLG was initially established in 2003 and, since then, we have funded the development of thousands of new homes.

Post credit crisis, our strategy was to focus on the south east of England. Our head office is based in Woking, Surrey and we started off for the first twelve months after the credit crash supporting sites within a one-hour drive of Woking but then, as the team began to expand and our capacity grew, we were able to provide a wider network of lending and we moved nationwide.

Today, our business model is having new business staff based locally throughout the UK, for example we have an office up in Glasgow, we have people living and working in the North West and the South West, and we service and support the rest of the country from the head office in Woking.

We have evolved our business structure in this way so that we can provide developers with direct access to experienced local relationship managers and decision makers that they can talk with and who understand their market.

We are a diverse team of different characters but we all share a common trait: we all specialise in development finance lending and each of us is passionate about the part we play in our business.

What sort of impact are the on‐going Brexit negotiations having from where you are sitting in the market?

We employ a great team of property and financial analysts who monitor house prices and the market as a whole, they provide us with excellent market analysis. At this point, the impact of Brexit has been minimal, helped by the fact that we haven’t been lending in Central London where property prices for ultra-prime and prime have seen more change.

Talking with our peers, brokers and customers, we see more of a positive attitude today than we did 12 months ago. At grass roots the demand is strong for good schemes and the attitude is “let’s get on with it and build some houses”.

What are the different types of funding that you offer?

We provide senior and stretch senior funding; primarily residential development funding. On occasion we cater for mixed use and some commercial, if the commercial element is pre‐sold or pre‐let.

BLG are known for specialising in residential development finance as you just said. What makes the company such an expert in that particular sector?

Primarily we are experts in property development funding because that’s all we focus upon. It’s our reason for being!

Over the past 15 years we have hired a great team of people with experience in our sector, they join us with good industry contacts and an understanding about schemes that have gone well in the past, and things that have gone badly. Several of our team have 20+ years’ experience, they have been at the front-line of property development and learnt the best way of supporting property developers.

House building is such a tightly regulated industry, do you think that the legislation is constricting the growth of the industry?

The development finance of the loan is a non‐regulated product, because it is a business-to-business loan it is not regulated. In terms of house building the regulations really relate to the planning and to obtaining that. The elements that are constricting growth in house building have many factors, such as planning, available sites and resources, etc. But the growth of this industry is not being restricted by residential development funding. Funding is available for good schemes – developers in doubt should contact us!

What sort of financial parameters do you have in place?

We lend a cash loan of up to a maximum of either 80% of loan to cost, or 65% loan to value.

What is BLG’s lending strategy?

Our lending strategy is to continue to work with great developers and brokers. We will lend nationwide on good schemes, at some point we will come back and start lending inside London. Our strategy is also to primarily lend to developments where the buyers of the property are UK residents. We look for UK residents and tax payers.

Our tagline is “Our business is helping you build” and that pretty much sums it up!

Mezzanine Development Finance is becoming ever popular. What do BLG offer in that sector?

Because we offer senior and stretch senior lending to 80%, we only have the odd development finance on mezzanine. But this doesn’t exclude clients who are seeking mezzanine funding from BLG, we have a panel of funding partners with whom we can quickly arrange mezzanine funding if the need arises.

For us, we look to structure the loan to meet the developer’s funding requirements and usually this fits within our popular stretch-senior loan.

How do you make sure your customers keep coming back to BLG?

It’s simple really, we give our customers what they want in terms of service and loans. Making sure they feel comfortable, and that if we say we can deliver a loan, that we deliver a loan, and we can do it in a fairly responsive time frame.

Our company culture is centred on customer care, this means everyone from the person who answers the phone, to our finance team, our credit analysts, our senior team and everyone else wants to do our best for our customers.

We also conduct regular research with our customers to check what we have done well and what we can improve upon. We don’t rest on our laurels, we can always improve further. For instance, we have recently produced a welcome pack for our developer borrowers that contains clear details of the loan process, a handy guide and an introduction to our credit team – so that developers know who will be supporting them through the underwriting and drawdown stages of their loan and how to best contact them.

It’s also important to note that many of our loan enquiries come to us from brokers, the developer’s financial intermediary. We value these relationships and work with several specialist brokers who have trust that we will take care of their client and ensure the broker is kept updated along the way.

Where do you see the development finance market in five years’ time?

Since the credit crash the house building industry has seen a big reduction in SME developments, which has contributed to the shortage of new house building. For the market to really grow back, one of the key factors would be to see a growth in the number of SME developers. BLG’s primary customers are SME developers, so we are here to support them and grow with them as they grow in the market.

Do BLG have any plans for expansion over the coming months?

Yes, we plan to grow our business and our loan book in the coming months. In preparation to achieve this growth, last year we hired new BDMs and various head office support staff. We have already experienced growth in the level of new business loan enquiries.

We understand that the best route to success is by creating prosperity and opportunities for our customers, our partners, our investors and our team; our business is to help them build and grow, as they prosper, so do we.

If there are any developers or brokers who are looking to partner with a responsive and experienced lender, our team is happy to talk with them.

About BLG

Initially established in 2003, BLG is a principal lender specialising in residential development finance.

We offer stretch senior, mezzanine, joint venture and equity finance loans to house builders and developers with projects across England, Wales and Scotland.

Our dedicated team has more than 200 years’ combined management experience gained in real estate banking, investment houses and financing companies.

We are responsive, proactive and solutions driven, in short “Our business is helping you build”.

You can find out more about BLG Finance at www.blgdevelopmentfinance.co.uk

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