It’s very possible that a client could see something with potential, but simply can’t finance it. Noel Meredith – Executive Director of the United Trust Bank – explains how they can help.
According to The Federation of Master Builders (FMB) ‘House Builders’ Survey 2017’, published in September, a shortage of available small sites and a lack of development finance top the list of barriers to smaller house builders delivering new homes.
I find this frustrating. Whilst it’s fair to say that the High Street banks have reduced their appetite for development funding for smaller companies, there is a thriving sector of specialist lenders, UTB included, with the skills, funds and appetite to help SME house builders acquire and complete smaller residential and mixed use projects.
If SME house builders look beyond the High Street, or approach one of the many professional brokers helping developers to find and secure competitive funding solutions, I believe they will be surprised at how much choice they have.
The Mayor of London’s recent Housing Strategy for London consultation document should also be welcomed by smaller housebuilders based in and around the capital. The proposed strategy aims to simplify the planning process on small brownfield sites, and this should make it easier for SME house builders to play a bigger role in contributing to the hundreds of thousands of new homes we need to build in the UK over the next few years.
There are thousands of smaller development and redevelopment sites scattered over London and although they can demand complex logistical and environmental consideration, they are often diamonds in the rough, projects ideally suited to the skills of SME house builders.
UTB has considerable experience of funding challenging developments from basement projects to permitted development conversions. One such project, with developers NestEast, was completed using a £1.7m finance facility provided by UTB. It is an excellent example of a talented SME developer taking a difficult site and creating a successful and stylish development of homes and office space.
The property was an existing two storey live/work unit which was located behind commercial properties and adjacent to a small electricity sub-station. The property had planning for the demolition of the existing building and the erection of a part three / four-storey mixed use scheme with lower ground floor offices and three flats on the upper floors. NestEast saw an opportunity to significantly enhance the currently consented scheme, however, they required bank funding towards the acquisition as well as future development costs. They also wanted assurance that if planning were to be enhanced, that further consideration could be given for what would be increased construction costs, albeit this would be set against a higher predicted GDV.
Following completion of the purchase, planning was indeed granted for a part three / four-storey mixed use scheme with B1 offices now located to the basement and three 3 bedroom flats to the upper floors, all with roof gardens and separate entrances at ground floor level. During the development, the client encountered several issues with a small number of suppliers which resulted in delays incurring additional costs. UTB continued to support the client, providing additional funding to cover the costs and overrun, and subsequently provided further equity release against the development to enable the client to purchase an additional site.
Our client, Zuzie Poskitt, is the Managing Director of NestEast and she was very pleased with the service she received from us: “United Trust Bank have been a most supportive finance partner and a breath of fresh air compared to some of our previous experiences. They do so much more than just release the stage payments on time. We value their good advice based on their industry knowledge and many years of experience and they quickly became an important part of the team. Their backing has enabled us to not only complete this successful development, but also to expand our business and take on more exciting and ambitious projects.”
“This was not a ‘vanilla’ project by any means. Their flexibility enabled us to achieve beneficial planning changes, to overcome supplier issues and to release sufficient equity to acquire another site. Adam Bovingdon and the team at UTB recognised and encouraged our desire to build high quality, distinctive and unique properties which would make them stand out in a competitive marketplace. They appreciated the thought and attention to detail which was put into the design and this has been rewarded with the creation of some stunning new homes. I very much look forward to working with United Trust Bank again on our next development.”
In summary, there are opportunities for SME house builders seeking out smaller development sites and if the planning process were simplified further those projects should become even more attractive. When it comes to funding, if a developer can demonstrate relevant experience, a sound financial footing and a proposal to create the right types of homes in the right locations and at the right prices, they should be able to find an experienced and supportive finance partner. I very much hope that when the same questions are asked of housebuilders next year, that securing finance has dropped down their lists of barriers to building new homes.
About United Trust Bank
United Trust Bank is an entrepreneurial and pragmatic specialist lender, driven to understand our customers’ needs. With dedicated divisions providing asset finance, bridging finance, development finance, professional loans, specialised mortgages, structured finance and technology finance, our in-depth knowledge combined with commercial awareness, makes us the lender of choice for finance brokers, developers and individuals seeking a high quality, bespoke service.
United Trust Bank is led by astute and knowledgeable individuals who collectively bring many decades of experience. Their insight and understanding enables us to provide quick, bespoke and flexible funding solutions to borrowers in a wide range of circumstances.
Establishing strong relationships with our broker partners is fundamental to the continued success of our business. We never underestimate the important role brokers play in acting as counsel to their clients and we strive to add value by providing outstanding service and building relationships for the long term.
United Trust Bank was incorporated in 1955. We are authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.