Giving developers the edge

Bridging has gained a reputation as being a jack of all property funding solutions and today’s property professionals are employing it in a variety of scenarios to seize opportunities and build their businesses. Although the speed and flexibility of bridging makes it suitable for a wide range of customers, from downsizing retirees to trusts and companies refinancing complex portfolios, its use in the property development and improvement sector has grown rapidly in the last few years. With competition currently rife to secure properties suitable for redevelopment, having access to funds quickly can give switched-on developers a competitive edge.

United Trust Bank (UTB) was one of the first lenders to spot the opportunity to offer bridging loans as a solution to acquire and fund property improvement projects and it has become a significant stream of business from long established customers and those new to the product and us. Over the last few years, we have refined the product and enhanced our service with considerable investment in fintech and streamlined processing. Although the restrictions presented by the Covid-19 lockdowns undoubtedly accelerated the implementation of some of these improvements, I believe we were ahead of the curve and had already become adept at assessing and agreeing proposals swiftly. Our most recent innovation, Fast-Track, enables us to issue offers on more straightforward cases within a day or so, sometimes hours. This is particularly relevant for auction purchases or time-sensitive transactions. Launched earlier this year, the service has been extremely well received.

Some of the digital enhancements we had introduced prior to Covid were crucial to enabling us to keep lending throughout the pandemic. For example, our industry leading app removed the need for face-toface meetings to fulfil KYC requirements and sign documents. It offers biometric identification and verification, and simplified admin. Clients can upload a picture of their passport or driving license on their mobile phone and have their identity verified through facial recognition in minutes. If the customer chooses dual legal representation, a time and money saver in many transactions, the app enables us to ‘passport’ details to the solicitor, making things even simpler and quicker.

Bridging transactions have differing degrees of complexity. We utilise automated valuation models (AVMs), whenever relevant, to reduce costs for customers and keep deals moving quickly. However, we also maintain a national valuer panel and employ the services of third parties such as professional asset managers for transactions requiring a more detailed analysis, like projects involving significant structural or complex conversion or refurbishment works.

Bridging’s flexibility can be important at the end of the project as well as the start. There may be several possible exits, and these may be adapted during the term if the customer’s circumstances change. For some, the exit will be from the proceeds of the sale of the improved property, for others—who intend to improve and then retain some or all of the properties for their portfolio—the exit may be a combination of a sale and/or refinance on to a BTL or other investment loan. One client had intended to sell the two apartments he’d created from redundant office space above a bank but mid project he rethought his plans and instead arranged to let them for a while. When his initial facility came to an end, UTB was able to provide the borrower with a medium-term facility to accommodate his change of plan.

For many projects, property developers choose to use the bridging route over traditional development finance because of the size of the loan, the flexibility of the product, the range of securities that can be considered, the speed at which it can be obtained, and the attractive relative cost. As a specialist property lending bank with strong development finance, structured finance and bridging finance teams, between us we can find solutions to suit most developer clients, whatever the type and scale of project they have in mind.

Customer Case Study

Bruce Burkitt www.propertyexperts.co.uk

Bruce Burkitt, founder and managing director of Property Experts, has developed over 700 units and become a regular customer of UTB’s Bridging Division. On this occasion, Mr Burkitt had identified a detached, threestorey house in South Croydon with potential to convert to seven self-contained flats. Once completed, the flats would be let and added to his company’s growing BTL portfolio. The house was previously used as a children’s home and the improvement works required were extensive. As well as internal remodelling, Mr Burkitt planned to excavate the basement and add a single storey extension to the rear. He had obtained permission to convert the house prior to committing to the purchase. Having recently completed a similar scheme on an adjacent property, he was well prepared for any foreseeable complications and knew what was needed to deliver another successful project. Mr Burkitt contacted broker Bruno Welch of Commercial Finance Practice who in turn approached United Trust Bank to provide the circa £1.8m required to cover the purchase price, cost of works and other fees, costs and interest for the 12-month facility. As a valued UTB customer and someone Gavin Diamond, UTB’s Director of Bridging Finance, has known for many years, the Bank was keen to support his latest project. By providing UTB with a charge over three unencumbered properties within his portfolio in addition to the Croydon house, Mr Burkitt was able to keep his cash requirements to a minimum. The proceeds of the loan facility provided him with a day one amount to buy the property and then fund 100% of the total cost of works in tranches, amounting to an overall loan facility of 66% of GDV. The works were estimated to take eight to nine months with the completed flats valued at around £2.5m. Bruce Burkitt commented: “The speed of arranging bridging, especially with a specialist like UTB, is really important. It’s a competitive market and there’s always interest in sites and properties with development potential. When I see an opportunity, I must be able to seize it quickly. “Specialist banks like UTB are setting a pace the high street just can’t keep up with. They’re the disruptors in the sector, introducing intelligent products and services which cater for people like me.”