Who, What, Why and How? Financing Development In 2018

Paul Turton, Head of Sales, Development Finance

With so many lenders in the marketplace, how should house builders set about making the right choice for their projects? Paul Turton, Head of Sales for Development Finance, explains.

Property finance is a complex world. There are hundreds of sources of funding in a variety of guises across the capital stack. There’s a wide range of lenders including the traditional high street banks to the largest pension and insurance companies looking for ways to invest their money. And, of course, there’s the growing presence of specialist and challenger banks, debt funds, family offices diversifying their wealth and the recent emergence of peer-to-peer lenders. However, despite the myriad choices, it is possible for a developer to rationalise their options through a simple ‘’Who, what, why and how?’’ question and answer process.

Ok. Tell me about United Trust Bank. United Trust Bank (UTB) is an award-winning specialist bank which has been lending to house builders since its incorporation in 1955. The Bank’s modern era began in 2003 when CEO Graham Davin and Group Managing Director Harley Kagan led a
successful management buy-out. At the time there were nine staff and a balance sheet of around £20m. Today there are nearly 200 staff, five lending divisions and a balance sheet of £1bn. In 2016 UTB was placed 25th in the Sunday Times BDO Profit Track 100 league table of the fastest growing private UK companies. UTB has grown by supporting a wide range of British businesses through all market conditions. The Bank increased its lending year on year throughout the credit crisis, our book remaining open when other lenders drastically reduced their appetites or withdrew from sectors altogether.

What do UTB do?
We provide development, structured, bridging and asset finance plus a range of second charge mortgages. Our customers include house builders, developers, SMEs and individuals providing bespoke financial solutions which enable them to complete an almost inexhaustible list of plans, projects and investments. These include, for example, funding the construction of new homes, helping SMEs to invest in new vehicles, plant and machinery, bridging downsizes for older borrowers, funding refurbishment projects, spreading the cost of
large company tax bills, enabling the purchase of rare classic and performance cars and releasing equity from a borrower’s home with a second charge mortgage. And more specifically for house builders? In development and structured finance our customers tend to be established house builders, developers and private clients operating throughout England and Wales and our lending proposition centres on our speed and consistent approach to delivering tailored finance solutions for new development projects. We make quick and reliable decisions to ensure that we provide our customers with the certainty they need to commit to new housing projects. All of this is supported by our team of knowledgeable and approachable property professionals.

We are a cool headed and flexible partner. We draw on decades of collective experience gained through periods of high growth, stable markets and recession and we are committed to supporting our customers through the ups and the downs of the economic cycle, ensuring that they can protect their existing investments and take advantage of new opportunities.

We lend mostly to experienced customers with demonstrable track records in predominately residential led development and house building
projects with facilities from around £1m to £25m. We follow our customers’ hard-earned capital and in doing so lend on the right properties in the
right places.

UTB is a highly respected stakeholder in the development and housebuilding industry. We work with property associations, trade bodies, such as the Home Builders Federation, the property press and government agencies such as the British Business Bank as well as the established professional practices offering real estate services. We are frequently invited to speak at property conferences and are ever present at all the key industry trade shows and events including MIPIM.

UTB publishes regular articles and comment on issues which impact on our customer’s daily business lives and also distribute case studies outlining how we have financed unusual or complex development sites to inspire and encourage the industry to bring us their projects, whatever their nature.

In uncertain times customers want to be confident that lenders are going to deliver the service and the funds they’ve promised. UTB has always been a dependable and adaptable lender, enabling house builders and developers to seize opportunities for investment and growth.

So why does UTB do what you do?
This is a most underused question, yet the answer will always set apart the lenders who want to build long term sustainable relationships within the house building sector from those which are in it for a quick return with no genuine concern for the wider impact on our local communities.

I could say that UTB like to finance the right
properties in the right places where people like to live, work and play. However, there’s nothing too unusual about that and it can feel a little too clichéd as a mission, so let me tell you a story instead…There is a street in the centre of Brighton and Hove called New Road. New Road was a typical street that you would find in any city centre with period buildings housing offices and, more interestingly, a private theatre all of which suffered from the daily pollution and noise generated by traffic congestion which is all too common across our urban landscapes. New Road also faces on to the attractive Royal Pavilion and its adjoining gardens which had been cut off by the barrier of daily commuter traffic. The pavements were narrow, cracked and like the adjoining buildings, unloved and unable to cope with modern day city life. A place to work? Maybe, but certainly not a place to live and play.

Then came forward a council initiative inspired by our friends in Copenhagen to create shared public spaces – New Road was the test case. The doctrine of shared space is that the pedestrian and cyclist always have priority over the motor car. As part of an ongoing wider regeneration plan the pavements and adjoining roads were merged in to one. This was constructed through investment in new paving and street furniture across the whole street and adjoining pathways. Pedestrians and cyclists were encouraged to use the entire length and breadth of the street and in doing so, traffic slowed and eventually avoided the area as the footfall significantly increased over the coming weeks and months. The accountancy and legal practices once occupying the ground level offices moved to the upper floors making way for a host of new bars and
restaurants attracted by this concentration of residents and workers going about their daily lives. The tables and chairs from these new occupiers spilled out in to the same public spaces that the motor car once occupied. The theatre once again thrives as the cultural centre of this public/private realm where the local residents, businesses and tourists now come together.

UTB was and continues to be inspired by the transformation of New Road. So much so, that we have become involved in the wider regeneration of the area by financing a new entrance to the historic Lanes opposite. This new entrance will provide new spaces for shops, restaurants, cafes and homes. This is the first new lane in Brighton for 150 years and it will draw new retailers and create a destination that helps support existing businesses.

The story of New Road is one of the reasons UTB became involved in the Lanes and the 200 or so other developments we support across the country which aim to contribute to and improve the locality for residents and workers.

Ok, so that’s the who, what and why. How do you do things at UTB? Long gone are the days when a developer could buy a consented site with a developer’s profit which reflected the true risk associated with the construction and sales process. To find value in 2018,
developers regularly buy sites and buildings unconditionally speculating on the planning gain. To accommodate this approach, we can provide funding through all the stages of a projects life cycle from the initial purchase, throughout the planning process, during the construction phase and supporting the sales or rental period of the finished project.

In essence:

1. We provide Site Finance and will consider nearly all commercial and residential use classes.
2. We provide Development Finance for commercial, residential and mixed use schemes.
3. Furthermore, if a customer is approaching practical completion of an existing project then we can provide Sales Period Finance allowing them to release capital towards acquiring new projects.

UTB can lend on new builds, conversions and refurbishments and will leverage planning consents gained by our customers and their
professional advisors.

We always tailor our funding agreements to a customer’s plans; loans are provided for terms appropriate to the complexities and size of each individual project.

Our credit committees are held every working day and our property development directors and managers champion their proposals in person to the Bank’s credit team and peers from other divisions. We endeavour to deliver an in-house committed facility letter to the customer within 24 hours of a sanction. However, actions speak louder than words so let me tell you another story…

The Bank was recently approached to assist with the redevelopment of an existing social club in to a mixed use residential led scheme including a new social club with adjoining office space and 18 brand new apartments in the upper parts.

The customer originally approached their local high street Bank but after a lengthy consideration the finance requested was not forthcoming. As such, time was of the essence. The customer was a joint venture between a local social club and an experienced house builder whereby the social club contributed their building and associated land in return for a new club facility and 2 of the apartments at practical completion of this new build scheme. We advised on the nature and structure of the JV agreements to ensure that the social club had confidence that the scheme would be delivered in line with the original design and planning permission granted.

request, we had met the customer, visited the site, liaised with their professional team, presented at credit committee and issued a committed facility letter to finance construction of the entire site. We also understand that the need for speed and consistency doesn’t stop at the initial decision. We are frequently complimented on our ability to arrange quick, sometimes same day, pay-outs on the completion of stage inspections by our quantity surveyors. This may not sound like an outstanding unique selling point, but it’s something many developers have experienced problems with from other lenders. After all, every day added to the project timetable costs money.

So, there you have it. The who, what, why and how of United Trust Bank and the way we do business. With so many choices of funding now
available to experienced house builders, making the right selection will help you not only get your project off to a great start but ensure its smooth progression to a successful completion.