Complex scenarios and simple solutions

Complex scenarios and simple solutions

Gerard Morgan Jackson – Head of Structured Finance

Structured finance is increasingly being employed by a diverse range of customers in a wide variety of circumstances.

Often, it’s the speed at which large facilities can be accessed which is the key reason behind choosing structured finance over other funding vehicles. Other times it’s the complexity of the customer’s personal or business circumstances, the nature of their portfolio or the means by which they derive an income which prompts them to choose a lender which will take a holistic view of their situation and make pragmatic and commercial lending decisions. Many customers and their brokers just want the assurance of dealing with a specialist lender which can quickly understand a complex situation and suggest a straightforward solution.

UTB’s Structured Finance division is committed to providing a full suite of property finance solutions for its customers. Combining nearly 100 years of experience in banking, development, commercial, bridging and other bespoke property finance vehicles, the Structured Finance team is perfectly placed to provide a service which draws upon the skills and deep specialist knowledge found across the Bank.

We were recently approached by a broker seeking a £3.2m facility for a customer who needed to 100% fund his next project. The customer was an experienced building contractor and developer with a strong track record of successful projects in East London. Subsequently the customer had built a small portfolio of buy to let properties and was in the process of completing a development of 8 apartments with an estimated gross development value of circa £4m.

With this current project nearing completion, the customer had identified a site suitable for his next development. The site has planning permission for two blocks of 20 apartments with a GDV of circa £12.5m and the facility requested would enable the customer to acquire the site, settle the substantial Stamp Duty liability, make the required pre-commencement contributions to the local authority under the Section 106 agreement and settle the current debt on the current project of 8 apartments.

There were two key exits available and it was most likely that a combination of the two would eventually be used to repay the loan. The first was an investment loan on the block of 8 apartments based on the rental income generated once the units were let. Any shortfall from the investment finance would be repaid from a development facility on the 40 unit project once pre-construction works had been completed.

The equity available between the two developments provided sufficient assurance to the Structured Finance Team that the loan met their criteria. The £3.2m facility was agreed and drawn down just a few weeks from receiving the initial proposal.

By quickly assessing the borrower’s situation, appraising his existing portfolio and the potential for the proposed new development, we were able to give a swift decision which enabled him to complete the negotiations to acquire the site within weeks. Subsequently he was able to purchase the site at an advantageous price and commence the planning proposal for his ambitious new project without delay.

Simplifying matters further, the client is now talking to us about providing an investment facility on the completed 8 apartment developments and a development finance facility for the £12.5m follow-on project. This continuity would enable the client to make a considerable cost savings, removing the need for a new valuation, reducing legal fees and avoiding new facility fees with a different lender. In addition, using UTB to fund both the site acquisition costs and the exits would also save the client time and reduce the administrative burden. Unsurprisingly, that’s something most customers are keen to pursue.

 



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