Regentsmead Interview

Describe the history of the company

Regentsmead is a property group that originated in 1934. We have been lending for the last 50 years in various ways and for the last couple of decades we have focussed our funding on development finance for new builds, conversions and refurbishments. Today we still manage our existing property portfolio and run a medical research charity alongside our development finance division.

Tell us about the services that you offer

We lend funds to experienced developers and builders for new builds, conversions and refurbishments. We are unique in the fact that we lend entirely our own funds which means that if we like the look of a particular case we can take it on, and just as importantly if we aren’t able to fund a case we will let the client know straight away so that we don’t waste their time. Time is often of the essence, particularly when securing a site so we understand that its key to move quickly. We have done a deal in 8 days before and we are looking to beat that record.

Can you explain your process to us?

It couldn’t be any simpler. We make a point of clearing out the jargon and paperwork that is strongly associated with traditional bank funding. We aren’t a bank and don’t operate as such. All of our clients receive a 5-star service. For every new client we fund we invite them into the office, they meet the team and we discuss the project at greater length. Funds are available as soon as the legal work is completed. As we lend entirely our own funds we don’t need this signed off from any external investors which puts our existing clients in a position of strength as they can big for sites as though they are a cash buyer with a precise idea of the level of funding we can provide.

Who are your main clients?

Experienced developers and builders however we have recently launched a joint venture option to partner those that are new to developing up with an experienced builder. This can be someone they know or someone that we can recommend that operates in the area.

Have you seen interest in Regentsmead go up as the housing market has undergone its recent boom?

We were one of very few lenders to be actively funding projects during the recession. Naturally our business has gone from strength to strength as the market has improved however this has encouraged new lenders to come into the development finance sector. The danger of this is that there is further competition on loan to values and we have seen examples of cases funded at some alarming levels which exposes both the lender and the client. The true test of a good lender is when things go wrong. The very nature of developments and building states that there are a catalogue of things that could go wrong during a project. Luckily we have substantial experience of most of these issues however there are plenty of funders around these days that aren’t entirely au fait with property and property related issues. Using our ample property experience we continue to lend at what we see as sensible levels that protect ourselves and, just as importantly, our developers.

What are your thoughts on the housing industry, do you think we’ve reached a peak now?

Nothing is certain in life and we are yet to meet anyone that can accurately predict what will happen in the market in the medium to long term. There are numerous uncertainties around the corner such as the general election and potential increases to interest rates. The only estimation we can make about the market is that it won’t stay the same, so as a lender we have to make sure we are appropriately protected when the market inevitably dips again.

What are the factors that people often overlook financially when house-building?

Who the lender is is usually quite important and often overlooked! We are surprised that developers aren’t too concerned where the money is coming from however if you are dealing with lenders that are heavily reliant on investors they are ultimately behold to them and there is always an air of uncertainty that the funds could be pulled at any time.

From a financial standpoint we find that sorting finances and warranties is often an afterthought as developers try and secure the best sites.

Can you tell me more about the areas you cover and your lending criteria?

We lend between £100,000 up to around £2 million however we can look at slightly larger facilities if the project suits. We lend to experienced borrowers mainly however as we often get approached by inexperienced clients with good schemes we offer a JV option where the inexperienced client can team up with an experienced party and form a JV. This can be a builder that they know or someone that we may know and could recommend in the area.

We lend mainly from the Midlands southwards, into south Wales and down into Devon. So the whole of Southern England. The reason why we avoid the north of England is from a service point of view. We like to lend in areas we have prior knowledge of and have relevant contacts. If something goes wrong on site we like to be able to get out there quickly.

Why should developers beware of taking a short term view?

We remain optimistic about the sector, having completed a recent survey amongst our borrowers which hints at a new found buoyancy in the market for 2014. The 2008 credit crunch paralysed the banks and seriously hindered many experienced builders and property developers through a lack of liquidity. As a result many good schemes were mothballed. Our poll has suggested that since 2010 there has been a 43% increase in the amount of small to medium sized builders active in the UK. In addition to these findings a recent Knight Frank report on the development finance market has confirmed that 70% of lenders expect to increase their level of residential development finance over the next 12 months. However we have argued that herein lies the problem.

Prior to the crash in 2008 there was a similar sense of optimism in the market with many bridging lenders and short term financiers stepping into the development market because of the apparent opportunities of this growing sector. Fast forward to 2014 and we are seeing an interesting example of history repeating itself. Lenders with relatively little experience in this sector are now trying to become competitive on the products they are offering, giving developers an array of choice in rates when sourcing cash for their projects. Interestingly,our development finance poll showed that 78% of developers would choose reputation and experience of a lender over price when sourcing their finance. For specialist firms such as ourselves who have been in existence for 80 years this latest potential bubble does not alter their attitude to sensible, cautious lending. 

Whilst the signs of an economic recovery are evident in the development finance and general property market it is perhaps a concern that so many lenders are stepping in with relatively little understanding of the nuances of a development finance case. When another downturn inevitably happens this will be the acid test of a lenders ability. If history were to repeat itself it is likely to be the lenders that don’t understand the market and end up leaving themselves exposed and unable to aid the growing need for housing in the UK.

As the saying goes “to be a genius, all you need is a rising market.”

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