Development finance is a fluid industry and there’s a lot to keep on top of if you want to secure the best terms for your development project.
We wanted to start a new series that helps unravel some of the mysteries and complexities of the development finance space – as well as provide you with practical tips for getting funding.
To kick things off, we chatted with LandFund’s Harry Eddery and Sarah Dix, Development Finance Relationship Director at Paragon Bank , in our recent webinar.
Below, we share some of their tips for optimising your funding partnership.
Covid has left its mark on many parts of the property industry – and development finance is no exception.
The post-covid construction boom led to a particularly buoyant sales market and the increased activity led to more demand for development funding.
This, in turn, led to a lot of liquidity in the market as existing banks and new entrants were deploying large amounts of capital.
The pandemic also resulted in a change in the type of properties buyers were looking for.
“We’ve definitely seen a movement towards people looking for bigger homes, amenities, a dedicated space to work, and definitely outdoor space. Even on flatted schemes – a requirement for a considerable level of amenity or green space nearby.” – Sarah Dix
Build to rent and sustainable developments have also been seeing increasing traction from buyers and funders alike.
Some banks are even offering green loans. Paragon offers a 50% reduction in exit fees for developers who meet certain criteria for their EPC.
If you’re thinking of going down the sustainable development route, it’s worth checking the incentives and support that prospective funders could provide.
Getting the balance of supplying the right amount of information is key to getting favourable terms and building a strong relationship with your funders.
“The level of detail you provide really helps us provide you with the best initial indicative terms.” – Sarah Dix
Too much detail and the important stuff could get lost. But too little and you risk not providing proper justification for your costs.
This is particularly important for cost per square foot and GDV – sharing your justifications can help convince funders your projections are as accurate as possible.
A good rule of thumb to follow as a developer is to share any evidence with your funder that you’ve gathered to prove to yourself you’re making the right decision and bring peace of mind.
The clearer the picture the funder can build, the more bespoke their funding package can be i.e. building in anticipated sales throughout the profile or tailoring the length of the pre-commencement period.
Getting to grips with industry shifts and managing the relationship with your funder can be a lot of work on top of actually getting your development out the door.
That’s where a broker comes in.
Working as a middle man between yourself and the funder, they can help package up the right information and get you the perfect funding fit for your project.
They are also able to guide you on what a realistic day one will look like and communicate this directly to the funders.
A good broker should have strong relationships with multiple funders and a strong insight into their preferences and requirements.
[As a broker] “Having a relationship with the funder is paramount to understanding their appetite – what they will and won’t accept. And understanding if that lender can take that case all the way through to completion.” – Harry Eddery
At LandFund, we use our many years of industry experience and network of trusted funders to get you the best deals for your development.
With our newly launched Lender Match function, we act as the broker and give you tailored support for securing funding – all without leaving the LandTech ecosystem.
Find out more about LandFund and how you can get the best funding offers.
Catch up on all of Harry and Sarah’s insights in the replay of our first Development Finance Focus webinar.
During the session, they covered: