Bridging Introducer November 2021 by mortgageintroducer

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INTRODUCER www.sfintroducer.com

November 2021

 ASTL  Bridging In-depth  Industry Comment

Sancus talks business heritage, expansion and about its approach to lending in a complex market

A diﬀerent approach

Bridge by Sancus Fast, people-led, decision making Loans from £100,000 to £5,000,000

Single point of contact > Residential > Semi-Commercial | Mixed Use > PRS Schemes | Auctions | HMO’s > Light to Heavy Refurbishment > Multiple Assets For further information please contact Emma Tempest or Saimir Kurti at contact@sancus.com

sancus.com LTV/LTC/Refurbishment costs 75%/85%/100% up to 24 months Rates from 0.55% with competitive procuration fees Indicative criteria only, each loan application is considered on its merits. Sancus Lending (UK) Ltd is regulated by the FCA, firm reference number 593992. Risk Warning: If you are co-funding you could lose part or all of your capital. Indicated returns, unless otherwise stated are shown before any provision for bad debts and may be subject to tax. Sancus do not provide private mortgages. Sancus Lending (UK) Ltd is incorporated under the laws of England and Wales, company number 7534003. Part of Sancus Group Holdings company no 57766 registered office Block C, Hirzel Court, Hirzel Street, St Peter Port, Guernsey GY1 2NL.

EDITORIAL

COMMENT

Publishing Director Robyn Hall Robyn@mortgageintroducer.com Publishing Editor Ryan Fowler Ryan@mortgageintroducer.com Editor Jessica Bird Jessicab@sfintroducer.com Deputy News Editor Jake Carter Jake@mortgageintroducer.com Editorial Director Nia Williams Nia@mortgageintroducer.com Commercial Director Matt Bond Matt@mortgageintroducer.com Advertising Sales Executive Tolu Akinnugba Tolu@mortgageintroducer.com Advertising Sales Executive Jordan Ashford Jordan@mortgageintroducer.com Campaign Manager Esha Gossain Esha@mortgageintroducer.com Production Editor Felix Blakeston Felix@mortgageintroducer.com Head of Marketing Robyn Ashman RobynA@mortgageintroducer.com CEDAC Media Ltd Signature Tower 42 25 Old Broad Street London EC2N 1HN

his is the first time I’ve written the editorial comment for Bridging Introducer for some time now. Whilst you have been in the expert hands of our specialist finance editor Jessica Bird, who is currently unwell (get well soon Jess!), it has been interesting to see that some things have finally started to change. Over the years the calls for increased education and professionalism have been constant from those firms who stick their heads above the parapet. Jake Carter looks at how things have changed on that front over the years in his feature on P16. And at the same time it is gladdening to see the industry is performing well. The latest installment of the Bridging Trends index, which combines the loan completions of several specialist finance packagers: Adapt Finance, Brightstar Financial, Capital B, Clever Lending, Complete FS, Enness Global, Finanta, Impact Specialist Finance, LDNfinance, Optimum Commercial, Sirius Group, and UK Property Finance, has just come out showing that the industry is in rude health. But the index only shows the bridging that goes on in plain sight. There is still a lot that goes on under the surface. The firms who take part in the index have all played key parts in professionalising the industry and getting it to where it is today. But here’s the rub. Strong lending figures draw new lenders to the sector constantly. How many times have you been called asking if you’ve heard of the latest Johnny Come Lately lender? My guess would be a lot. Now there’s nothing wrong with new lenders - competition is healthy but the industry and the associations that represent it need to ensure that these firms are held to the same high standards that have been set so far. Otherwise all this hard work could be for nothing in the end. B I

Ryan Fowler

Bridge by Sancus Fast, people-led, decision making Loans from £100,000 to £5,000,000 LTV/LTC/Refurbishment costs 75%/85%/100% up to 24 months Rates from 0.55% with competitive procuration fees

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Contents

Keep the standards high

RyanFowlerMI

5 Jonathan Newman Learn from the past, look to the future 7 Donna Wells The importance of having a ‘plan B’ 9 Jason Berry Small builders can solve housing shortage 13 Miranda Khadr Dealing with difficult to place cases 15 Miranda Khadr Tech in the specialist finance market 17 Kimberley Gates Has single use office space had its day? 26 Round-table: A changing world Jake Carter outlines the discussion at Bridging Introducer’s recent round-table, which looked at the impact of the pandemic, changing needs in the industry and the role of technology 32 Cover: A different approach Jessica Bird and Dan Walker, UK MD and deputy CEO of Sancus, discuss the business’ heritage, expansion and approach to lending 34 Vic Jannels The increased need for understanding

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Learn from the past, look to the future Jonathan Newman senior partner, Brightstone Law

t’s almost 35 years since I became a senior partner at Brightstone Law. Margaret Thatcher was in Number 10 Downing Street, it was still 11 years before the beginning of Google, and a decade before the launch of the iPhone. In many ways, our lives today would have seemed like science fiction in the late 1980s – access to a world’s worth of information in your pocket, keeping your photos in a cloud, video calling your friends and colleagues, all developments that stretched the concept of what is possible. Needless to say, the way in which we work has changed a huge amount. The first ground-breaking example of technological advancement and information exchange in 1987 – the fax machine – now has a place in museums rather than offices, although some solicitors’ offices can be easily mistaken as such! The way we communicate and do business has changed beyond recognition. The bridging market was clearly a very different place 35 years ago. It was a fledgling market that struggled to shake off poor reputation and stigma – perhaps with some reason at the time. Bridging was still very much a product of last resort. There were just a handful of lenders, completing just a few million in loans each year, rates were high and there was next to no oversight or trade associations, let alone any regulation. The sector today is unrecognisable. It has adapted to the opportunities and challenges of the last three and a half decades, and we now work in a sophisticated, customer-focused and competitive market.

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Fax machines: Not in today’s bridging market

Bridging is now, correctly, perceived as a valuable tool and caters for a much broader range of customers across a wider variety of uses. Lending volumes are significant, and lending is funded by a variety of methods as the sector has attracted banks, building societies, peer-to-peer lenders and capital markets interest. The range of properties that bridging can be secured on is also much more extensive than it was and it’s possible now to secure finance on almost any property asset. Oversight is also a world away from 35 years ago. Nearly half of bridging lending is regulated by the Financial Conduct Authority (FCA) at the moment, many lenders are Prudential Regulation Authority (PRA) regulated, and unregulated businesses, in my experience, operate to the same high standards of customer focus and due diligence when it comes to anti-money laundering and resources to spot and report fraud. Overall, bridging is a much more successful product, and the vast majority of cases are well written and paid off on time. Lending has grown exponentially over the last 35 years and the number of defaults remained relatively flat.

One thing that hasn’t changed, however, is lender appetite for risk, particularly when it comes to loan-tovalues (LTVs), and the market remains at very much in or around the same level regarding LTVs as it did all that time ago. But the main constant I see with the market today compared to 35 years ago, is that – while many of the personnel may have changed, methods of communication are completely different, and the market has become much more crowded – the same people and partnerships approach to doing business remains. Think about how you choose your partners. Is it as a result of being pitched to and sold a service, or does it come about from networking, and identifying people who you trust to know what they are talking about and to do a good job? Identifying the right people to work with was probably easier then – in a less crowded environment, establishing provenance in the market was more straight forward – but the principle remains: go with who you know, who has performed, or those that you know to have performed for others, identified by referral and recommendation. This is a potentially complex industry that thrives on long-standing relationships and proven expertise, and that is one of my favourite things about the sector – people can still make a huge difference. We’re at an exciting point in the bridging industry. There are many immediate challenges as lenders begin to react to the fall-out of COVID, but with the right experience and guidance, there are strong foundations on which to build for the future. We have the potential to build a market that reaches even more people and solves even more funding problems and the last three decades have shown us that we can do this in a way that is built on people. Technology will change. Regulation will change. Our customers’ requirements will change, but experience and relationships will be crucial for the bridging market, which is perhaps the secret to its success. B I

NOVEMBER 2021

BRIDGING INTRODUCER

Bridge to Let Development Exit option Short-term funding with a guaranteed exit option Our Bridge to Let option combines the best of our bridging and term products, providing short-term funding, plus a guaranteed exit option, should it be needed. With both options being underwritten from application, your client has certainty of an exit from the beginning of the transaction. Our bridging products offer: • Up to 80% gross day one LTV (up to 75% on Development Exits) • Up to 75% gross LTV onto a fixed rate term product, agreed at application • A bridging rate of 0.67% pcm • Term exit products from 3.82% We’ll consider applications from: • Experienced landlords and first-time landlords • Limited companies, SPVs and offshore companies • Ex-pats and foreign nationals Our Bridge to Let - Development Exit option is ideal for completed BTL projects that are looking to switch to more affordable bridging in the short-term, with a guaranteed term exit option.

Call us on 0345 241 3079 Visit www.castletrust.co.uk Castle Trust Bank means Castle Trust Capital plc, a company incorporated in England and Wales with company number 07454474 and registered office at 10 Norwich Street, London, EC4A 1BD. Castle Trust Capital plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, under reference number 541910. Buy to Let is not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.

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The importance of having a ‘plan B’ Donna Wells director, First 4 Bridging

n last month’s Bridging Introducer article, I touched upon the return of physical events, the importance attached to face-toface interactions and the success of our recent series of specialist lending seminars. Throughout this barrage of expos, seminars and awards ceremonies, it has been uplifting to catch up with the great and the good of the industry and to make the most of this newfound freedom. However, it’s important not to get too carried away, in light of the headline that Britain is being urged to enforce a ‘plan B’ which would bring back mandatory face masks and more working from home in order to avoid a ‘winter crisis’ amid rising COVID-19 cases. When operating in a market which has been so overwhelmingly busy throughout the pandemic, if you happen to miss the news for a few days, it can be easy to forget that the dark shadow of COVID-19 continues to loom over us. Especially as we head into the winter months, where cases are expected to rise further. A scenario – depending on how rampant the virus becomes – which could further impact our business and personal lives. So how do we as a business approach this somewhat uncertain period? The sheer unknown was the most worrying factor of the initial lockdown and the challenges this presented from a personal and business perspective were pretty intimidating. We all had to adjust on a number of levels, and I think that if you can learn through adversity, then you will always emerge stronger. As a team, we have all adapted to www.sfintroducer.com

working that bit smarter and I believe that the new skills we have learned will stand us in good stead when it comes to maintaining and building even stronger relationships and overcoming any potential obstacles moving forward. As a business, we have always tried to build strong, close-knit teams which feed off the atmosphere of sourcing the right solutions to meet a range of client needs and successfully navigating cases through to completion in a timely and responsible manner. This remains in the case in our Buckinghamshire and Manchesterbased offices, but we now have the infrastructure in place to operate remotely where necessary and this remains a viable option for certain components of the business

“When operating in a market which has been so overwhelmingly busy throughout the pandemic, if you happen to miss the news for a few days, it can be easy to forget that the dark shadow of COVID-19 continues to loom” It’s important to maintain the right balance for the type of business we are, and we have to remain aware of our responsibility to our introducers, our lending partners and our people. Not to mention those from a regulatory perspective. A factor which was apparent in light of the Financial Conduct Authority (FCA) recently issuing new guidance to companies who are operating a remote or hybrid working model. The guidance states that companies should be careful to ensure that remote working does not affect the ability of the firm to oversee its functions, cause detriment to consumers, damage the integrity of the market, increase financial crime or reduce competition.

Proper planning prevents poor performance

The organisation stipulates that companies must also prove that they have the necessary planning in place to verify that any adopted form of remote or hybrid working should not risk or compromise the firm’s ability to follow all rules, regulatory standards and obligations. This includes making sure that firms have the necessary systems and controls implemented – including IT functionality, have considered any data, cyber and security risks, and have ensured all control functions, such as risk, compliance and internal audit, can carry out unaffected – such as when listening to client calls or reviewing files. The guidance also states that any firm which intends to make any material changes to how it operates may need to notify the FCA first. Whilst we are consistently evaluating every aspect of the business; it’s fair to say that this extraordinary period has certainly made us think longer and harder about some of the ways in which we operate – in terms of efficiency, how we utilise technology and the need to plan better for any future potential disruptions. Having a plan B and even plan C in place now can help intermediary firms to combat any challenges which we may, or hopefully may not, face over the course of the winter months. B I

NOVEMBER 2021 BRIDGING INTRODUCER

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DEVELOPMENT XXXXXXXXX

Small builders can solve housing shortage Jason Berry group sales and marketing director, Crystal Specialist Finance

t’s no secret that the UK continues to struggle with a housing shortage. Even without the encouragement of the stamp duty holiday, the fact demand for housing has long outstripped supply has led to years of significant house price growth. However, when it comes to increasing the rate at which new homes are built, progress is being made. The latest data released by the Office for National Statistics (ONS) shows that in the 12 months to June, around 183,000 homes were completed. Not only is this a sharp jump of 26% on the previous 12 months – a period which of course was heavily impacted by the pandemic – but it’s the highest figure seen in many years. This momentum is continuing, too, with the number of development starts also at strong levels. It’s a promising sign not only for addressing the housing shortage, but also for those involved in the development industry, from lenders to individual mortgage advisers. FUNDING IN THE RIGHT HANDS

One of the problems that the industry has faced for some time has been the over-reliance on the big builders However, in reality they are already largely at capacity – if we are to increase the number of homes being built, then we need to do more to support small and medium-sized (SME) builders in getting their own projects off the ground. That’s why it’s so encouraging to see initiatives like the partnership between Lloyds and Homes England, which has resulted in a £300m fund being provided for these smaller builders to www.sfintroducer.com

tap into. The fund is open to developers looking to start projects building between five and 500 units, and it’s thought that it will help pave the way for an additional 10,000 new homes by 2025. This is absolutely welcome, and a great sign that those in charge recognise that one of the key ways we can get on with delivering more homes is to encourage a more diverse array of builders.

“We need to do more to support small and mediumsized (SME) builders in getting their own projects off the ground. That’s why it’s so encouraging to see initiatives like the partnership between Lloyds and Homes England, which has resulted in a £300m fund being provided for these smaller builders to tap into” Coupled with proposed changes to the planning system, and opening up more land to small builders, there is real potential for change. A WAY OUT

However, it’s worth recognising that things are complicated for small builders at the moment, with many having to adapt to a plan B. While the project itself may be at, or nearing, completion, they may not have yet managed to sell the units and need a little more time – and money – in order to market it properly and secure the best possible return. This has become a particular problem for many developers, who have seen their projects hit hard by issues over the supply of building materials and labour shortages.

The Federation of Master Builders has warned the materials shortage is disproportionately affecting small builders, delaying the completion of their projects, and adding to their costs. Thankfully, lenders have recognised the issue and shown some innovation, as a host of lenders now offer dedicated development exit products. The idea is that the developer moves off of the initial development deal and onto a competitively priced bridging loan, providing them with some muchneeded breathing space so they can get on with selling the unit free from deadline worries. WORKING TOGETHER

The world of development finance can be a complicated one, particularly for advisers who may only handle a few development cases a year. Indeed, some advisers may feel illequipped to help their clients should they enquire about a development finance loan. That’s why it’s so important for advisers to think carefully about the businesses they collaborate with. At Crystal Specialist Finance, we’re determined to make the advice process as straightforward as possible for our adviser partners, developing our online Hub which allows them to populate client requirements within just a couple of minutes. They are then connected with an underwriter so terms can be quickly shared and agreed, allowing the client to swiftly access the funds they need and get on with their development project. We have built a team of dedicated development finance experts who can help your client with their project, taking the stress out of what can be a complex process and allowing them to focus their efforts on more pressing tasks. This is particularly important for small and medium-sized builders, who are more likely to be resource stretched and so benefit even more from an expert helping hand. By working together, we can help those small and medium-sized builders to get on with delivering the homes the nation needs. B I

NOVEMBER 2021 BRIDGING INTRODUCER

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APPLICATIONS

Closing the loan quickly Brian Rubins executive chairman, Alternative Bridging Corporation Limited

istorically, a bridging loan was a ‘quick-fix’ – a shortterm loan while waiting for a property, usually a private dwelling, to be sold or refinanced. In fact, it has become much more, and lenders and brokers are now dealing with commercial and residential bridging, finance for residential developments, refurbishment loans and working capital for the business community. But the quick fix is often not so quick, so how can this be remedied? First, as lenders, we see immense differences in the way loans are proposed to us by various brokers. From some – at best – it is a paragraph, others a bunch of documents which we are left to decipher, and from a few it is a good outline of the project, details of the principals, and a clear indication of the requirement backed up by supporting documents. Old fashioned it may be, but a loan application form is of great value, particularly if it is fully completed without ‘to follow’ or ‘not applicable’. The last thing lenders wish to do is to decline a loan at the latter stages of the due diligence process because adverse information is discovered, or the facts are not as at first presented. The due diligence process is designed to identify any reasons to abort, but similarly to confirm the lender’s ability to make the advance. In simple language: the better the information, the quicker and more positive the response. In many valuation reports there is a section on strengths and weaknesses. It would be helpful if this was repeated in loan proposals. If the company has had some difficult years, or the borrower has County Court Judgments (CCJ), or the property is in need of repair, say so www.sfintroducer.com

and explain how this is to be addressed. Unless it is a tick-box lender, there will be no need to decline, but it will speed up the process to know in advance and to build into the arrangements the solution for these or any other problems. If the borrower’s solicitor is aware of any difficulties with the title which can be overcome by a defective title policy, this should be brought to the lender’s attention asap, not at the last minute when the lender’s solicitor prepares the Report on Title. Why not deal with the defective title insurance during the due diligence period instead of scampering around at the end of the process causing completion to be delayed? For commercial bridging loans, precise details of the occupation of the property are essential. So often, we are just told there is a rental income of so much with no detail. This causes delay and it would be so much better to receive the detail on day one. This should include the correct name of each tenant, the expiry date of each lease, details of any rent reviews or break clauses, and finally the responsibility for repairs. Residential development finance is totally different. There are more moving parts, the process is more demanding, and as a result the due diligence takes longer. It is a fact of life, but it can be managed with forethought, openness, and cooperation. Some brokers specialise in development finance, but others only come into contact with it from time to time. For the less informed, the solution is to work closely with a lender who can lead the way. If necessary, start with a discussion to explain what is being constructed and the funding requirement and ascertain if the opportunity has legs and what is required. In this way, lot of time and effort can be saved by all parties, enabling good projects to go forward in a well organised way and for nonstarters to be exactly that, but without wasted effort and delay.

Development finance proposals need to be supported by good documentation, and again a well completed application form will provide much of the information which is needed. At a minimum, the lender will require an appraisal and cashflow forecast and details of the borrower’s experience evidenced by details of previous projects. Also, planning is sometimes complicated but if the lender knows the reference number of the application, they can refer to the local authority’s web site and obtain a copy of the consent and the approved plans as well as the S.106 Agreement if there is one. Construction is procured in several different ways. Sometimes the developer is also the contractor, managing a group of sub-contractors, or there may be a main contractor at a supposed fixed price under a Joint Contracts Tribunal (JCT) contract. Either way, it is necessary for this to be disclosed to the lender at an early stage together with the identity of the main contractor or sub-contractors and professional team, with the cost confirmed by the contractor(s), or a detailed breakdown from a quantity surveyor. Currently valuations are taking extended periods to be completed, and this is particularly so for more complex transactions, and this includes residential developments. Accordingly, the sooner instructions can be given to the valuer, the earlier the report will be received. However, there is little purpose starting the ball rolling without firm facts. Valuations based on unproven assumptions are likely to cause problems later when the reality is found to be different. All of this may sound like a lot of bureaucracy and hard work, but it isn’t. It is the way to get loans closed more quickly and to avoid last-minute disasters. Combine this attention to detail with an experienced lender, and completions and commissions will flow more often and more quickly. B I

NOVEMBER 2021

BRIDGING INTRODUCER

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Dealing with diﬃcult to place cases Miranda Khadr CEO and founder, Pitch 4 Finance

n recent months we have seen new bridging lenders appear in an already crowded specialist lending sector. Whilst the majority of these lenders are comfortable in the residential or semi-commercial space, there are far fewer dipping their toe into the world of fully commercial bridging loans. There could be many reasons for this. Recently, it could be fear brought on by the pandemic and in turn the nervousness towards commercial assets. However, I believe the narrative began far earlier than the last couple of years. On entering the bridging and short-term lending market it is rare the products that lenders start with are commercial products. Instead, lenders lean towards a simple residential offering before expanding product ranges into semi-commercial and refurbishment products.

Commercial products either come in as late runners or not at all, in some cases. Whilst residential products get larger and more flexible, commercial products become the bread and butter for a small minority. There are reliable lenders in this space that retain and hold the majority of these products and accordingly find little competition. Together, Shawbrook, Interbay, YBS, Proplend and Ortus lead the charge offering shorter and longer-term products within the commercial space. However, there is nowhere near the product offering that exists in the residential sector which includes bridge-to-let, development exit products, light refurbishment products all the way up to heavy refurbishment. If you can name it – there is probably a product for it. However, this simply is not the case in the commercial sector. This may be due to funding line parameters of the bridging lenders but with so much competition these funders need to consider taking a leap of faith and looking towards a market that has certainly less competition, and greater margins.

Commercial deals: The diﬀerence between the number of commercial and residential deals is clear

www.sfintroducer.com

“Lending on commercial real estate assets is a different skill set from underwriting residential transactions and this is also an impediment to growing teams in this sector” Lending on commercial real estate assets is a different skill set from underwriting residential transactions and this is also an impediment to growing teams in this sector. The new arrivals of Recognise, Allica and Atom bank have helped matters, but there is still less choice of product and less opportunity to be flexible within the commercial real estate debt sector. The solutions on our system show this in greater clarity. On residential – no development – bridging finance we can provide on average 40 to 45 potential lender matches. On a commercial bridging finance transaction that figure drops to between 15 and 30, depending on the asset class. That is a significant drop and shows the difference between the two markets quite clearly. There are some lenders that will look at niche assets but when these aren’t openly available on sourcing systems or are niche and boutique lenders, these solutions are even harder to find. We all have to ask for these product areas to be looked at by the lenders in our sector so greater options are available to our clients. More importantly we should be asking for the disparity and lack of proportion between commercial and residential to be changed and considered from a product offering basis. There are times when if you were building a commercial asset such as a hotel or shopping centre over the last two years without an end tenant this would have provided very limited results no matter how strong the sponsors of the transaction. It is our role as intermediaries in this sector to encourage lenders to fill these less well served funding gaps. B I

NOVEMBER 2021

BRIDGING INTRODUCER

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Has single use oﬃce space had its day? INCUBATOR SPACES

Kimberley Gates head of strategic partnerships, Sirius Property Finance

t is safe to say that the grey space market has experienced a shake up in the past year. Whilst many still hold a firm belief that nothing beats face-to-face teamwork, the majority of businesses seem resigned to the fact that, to stay competitive as an employer, they must continue to provide enhanced work life balance that many employees have now experienced. The most likely route for many businesses will be a hybrid between working from home and the office, which will inevitably mean a reduction in office space lettings. Landlords will be keen to keep hold of corporate tenants, but the savvy will recognise the need to both spread the risk and ensure that the office spaces they bring to the market offer more than just a desk, kitchenette, and bathroom. LIVE, WORK, PLAY

In the residential market, many customers expect an array of amenities all under the one roof including, amongst others, gym, cinema, cafe, launderette, gardens, and co-working space. This ‘lifestyle’ transition is happening in the commercial sector as well. You only have to look to experienceled retail and vibrant co-working spaces to see this in action in the commercial environment also. I believe that the pandemic has sped up this process significantly. What was once a luxury will now far sooner become an expectation, particularly within offices in prime city centre locations, and landlords need to be ahead of this. www.sfintroducer.com

Commercial landlords looking to spread risk are diversifying from offering strictly office spaces to having a diverse mix of tenants and vendors all under one roof. Mixed use diversification usually includes complimentary service offerings to appeal to the work force and create a community centric space, such as well-being zones, fitness studios, events space, food & beverage, beauty salons, art studios and retail. There is a growing trend for spaces that can be converted easily with temporary walls or movable room divides to ensure it can meet different uses depending on the time of day, and an unstable market will ensure that potential tenants will value flexibility. Young companies require spaces with reasonable fit out costs and a space’s ability to act as an incubator for fresh concepts can generate a welcome hype amongst other tenants, as has been demonstrated by the pop-up phenomenon in retail. ARE SPECIALISTS THE KEY?

Caution is advised for landlords when it comes to structuring the operational side when converting office space to mixed use. Fulfilling a landlord/operator hybrid role for a commercial space in which all floors are occupied by office tenants is one thing. Converting the excess office space to appeal to different types of tenants and manage a diverse collection of spaces requires one or more specialist operators. Landlords will do well to recognise the need to invest in outsourcing these specialist skills for a better chance of success. FLUID MIXED USE REAL ESTATE

A term being bandied about currently is the ‘hotelification’ of office buildings, with enhanced amenities including

improved food and beverage offerings alongside members club style amenities. Some landlords may choose to take this a step further and add a residential offering with onsite rooms to rent. Even if landlords decide to add a residential element, any mixed use or semi-commercial space borrowing will be treated as a commercial mortgage. Lenders will assess the business plan or require a financial forecast of the potential rental returns. As discussed, the office space market has been hard hit by the pandemic so innovative spaces that can accommodate a diverse range of tenants and demonstrate demand aside from just those seeking desk space could prove to be a more appealing lending option in the current market. BRING IN THE EXPERTS

The current environment presents many potential variables, so it’s important for investors to consult a specialist debt advisor, or commercial mortgage broker, to structure a bespoke debt package whether this be for acquisition, development, refurbishment, conversion or refinancing. An advisor that understands the mixed-use commercial space will be able to navigate the crowded lending market to find a product to suit the budget and LTV requirements and a lender partner able to give an investor the best chance of making a success of their space, as well as offering greater flexibility further down the line should any issues arise. There is much opportunity for the acquisition of prime office space currently but to create a viable business, investors are having to be more strategic, consult experts, collaborate, and know their target market better than ever. Whilst we cannot eliminate David Brent-esque characters, the stereotypical dreary grey office so perfectly immortalised in The Oﬃce is set to become an endangered species. The office is getting an inspirational, healthy and reenergised makeover to match the modern-day workforce and I am certainly here for it. B I

NOVEMBER 2021

BRIDGING INTRODUCER

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BUILDING A BRIDGE

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Jake Carter looks at how perceptions of bridging finance have changed over the past few years and considers the positive role it plays in the UK property market

he bridging market has had many iterations over the years and has developed from a gentleman’s agreement to a fringe industry and finally in to a mainstay of the UK property finance industry of late. The days of asking your bank manager for a facility to get you from A to B are long since gone as is the potential gritty image of the industry. Professionalism has flourished in the industry which has been transformed by lenders that many brokers today would consider household names. And despite a small reversal in growth brought about by the pandemic, the sector has grown into a behemoth. The latest EY Bridging Market Study reckons the size of the market now exceeds £4.8bn – some increase from where it was a decade ago. Indeed, Anthony Bodenstein, founder and managing partner of Whitehall Capital, says the industry has changed beyond all recognition. “Bridge lenders are today seen by many as a more mainstream funding source”, he says. “Bridgers are not seen as a lender of last resort, as they once were. “There is greater transparency around pricing, and the lending criteria of any lender is freely available in the public domain; at the click of a mouse, individuals can see how we compare with our peers and make better, more informed decisions.” Roger Morris, group distribution director at Precise Mortgages agrees that the perception of the market has changed. He points back to when Precise Mortgages first entered the market in 2011. Back then it was not uncommon for a borrower to be charged interest on the interest as well as exit penalties. He also says it was normal practice to have two lawyers, one for the borrower and one for the lender, →

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MARKET XXXXXXXXX which made everything more expensive. Morris reiterates Bodenstein’s point and says: “There was also a lingering perception that bridging finance was complicated and only something to consider as a last resort. “The sector today is unrecognisable to the one found 10 years ago and I’d like to think that Precise Mortgages has been a catalyst in helping to change the way bridging is now regarded.” Morris says that in the current market, lending practices have improved considerably, interest rates have dropped substantially and no exit penalties are the norm now, rather than the exception. Chris Oatway, director of LDNfinance also believes that the industry has come a long way in the past 10 years and has now grown a strong reputation of being a problem solver or deal maker rather than, and here’s that phrase again, an option of last resort. “The industry has been spearheaded by multiple influential business leaders who have consistently driven the industry in the right direction,” he adds. It’s a point echoed by Jaxon Stevens, head of sales for the south at Sancus. “Historically there has been a perception that bridging is expensive, with an assumption of high rates and high fees to both obtain and to exit the loans.” What’s helped combat this, according to Stevens, is increased awareness and education around bridging finance costing and fees. Bodenstein agrees: “Brokers have had a big part to play in helping clients to see bridge finance as a legitimate funding source, rather than something to avoid. “Brokers act as the clients’ ‘critical friend’, helping to source the right deal, and working closely with the lender throughout the process.” And Jason Berry, group sales marketing director at Crystal Specialist Finance, believes the bridging market has drastically progressed over the past 10 years. He says: “Bridging finance has come a long way over the past decade and with complex circumstances becoming the new norm, short-term funding solutions are more relevant than at any time previously. There is certainly cause to be optimistic for the future.” TECHNOLOGICAL ADVANCES There was a time when a fax machine was seen as high tech in the bridging industry. However, over the past few years technology has helped facilitate growth in the sector and this has been furthered by the COVID pandemic through the requirement of working from home for many. Oatway says the importance of technology was raised considerably when the UK was hit with COVID-19, but he believes the improvements are here to stay. He also thinks that technology is now seen as a solid sales tool to clients and brokers to demonstrate www.sfintroducer.com

reliability and transparency. “Technology enhancements have been game changing for some lenders, enabling them to oﬀer a better and more reliable service,” he adds. Bodenstein says that cloud, blockchain and web referral forms all have a role to play in the future for the industry. And he believes that tech will and is already, helping to make faster decisions, and to speed up the process. He says: “We can, for example, use various valuation portals to place and receive valuations, without delay. “We can secure multiple quotes and instruction timelines to help us select the most appropriate for each lending circumstance.”

“Bridging finance has come a long way over the past decade and with complex circumstances becoming the new norm, short-term funding solutions are more relevant than at any time previously. There is certainly cause to be optimistic for the future” Berry explains that brokers get frustrated rekeying information time after time and he believes that lenders and distributors must find ways to eliminate this. He suggests this can be done by either building better processes in house or by collaborating with host or proprietary broker systems. Oatway says that while the bridging industry is not heavily reliant on sourcing systems like the residential mortgage industry, they still oﬀer a valuable tool to any broking business. Vic Jannels, chief executive of the Association of Short Term Lenders (ASTL) says that a broker’s job is to identify a customer’s requirements and use the most appropriate solution. This means keeping up with criteria and knowing how best to identify and use the product. “Systems exist already to help with this although a ready knowledge of ‘behind the scenes’ criteria is also a pre-requisite,” he says. Jannels goes on to say that a major and crucial element of bridging is the need to understand and deliver an appropriate client exit strategy in order to repay the bridge. He adds: “This is one of the most important considerations for lenders in underwriting bridging loans and an application may well hang on whether the strategy is suitably robust and plausible.” Meanwhile, Morris says that while tech has a part to play within bridging finance, he thinks it is limited. → NOVEMBER 2021

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MARKET XXXXXXXXX He says that it can help provide more accuracy and assurance when it comes to AVM data and the legal process, but there is only so much of the process that can be computerised. Morries explains that a case can only go through as quickly as a broker can send an accurate set of case information. It has then got to be manually assessed by a specialist underwriter before a decision can be made. He says: “The human element is still vitally important and plays a huge role and this is where dealing with a lender with expertise in bridging can really make all the diﬀerence.” SPEED OF BRIDGING Speed is something commonly associated with the bridging industry and part of its appeal as it allows for purchases to complete where they may have encountered issues due to time restraints without it. Jannels says that bridging is certainly being used to speed up or even save transactions and is a valuable tool for auction purchases, which normally need to complete within 28 days from hammer down. On a wider level though, Jannels believes that brokers should view bridging as an essential piece

“The code of conduct adopted by members of the ASTL helps to encourage honesty and integrity across the bridging market and in turn helps to reduce the activity of some ‘rogue traders’ in the market” of the puzzle when it comes to the funding solutions they are able to oﬀer their clients. He says: “For example, where a customer is refurbishing a property or perhaps converting a building into an HMO, or any circumstances where standard mortgage lending would be unavailable, bridging can fill the gap, enabling the property to become mortgageable and longer-term finance sourced.” Bodenstein says that bridging has facilitated faster, more eﬃcient transactions and represents ‘the art of the possible.’ Stevens agrees adding that it is a valuable tool for property investors and developers as they look for ways to help secure opportunities in a timely manner. He explains: “There are scenarios when having the ‘safety net’ of a bridging loan available can really add confidence to a purchase transaction.” The use of bridging can help when experiencing delays or needing to complete within a relatively short www.sfintroducer.com 11:58

frame such as those given when purchasing at auction. Berry also points to use of bridging in chain breaks, however says that following the stamp duty holiday it is likely this will become far less common. However, Berry does expect the use of bridging for auction finance to continue as he says the product is tailored to fit where there are deadline pressures and also where there is frequent need for heavy refurb or change of use on the properties. As a result of the recently relaxed planning rules, Berry expects there to be a surge in the number of borrowers trying to find empty commercial and retail premises which can be converted to residential through the use of bridging. Another benefit of fast finance, Morris says that topically, bridging can be used to help finance refurbishment properties to bring them up to a C rating standard for EPCs. Overall, Oatway believes that all bridging should be fast and the speed of bridging lenders can allow property investors to build a portfolio from buying below market value assets and also provide funding to optimise the value of each unit through refurbishment. ETHICAL LENDING AND NEW ENTRANTS As more lenders have entered the market, the sector has been driven to higher levels of professionalism which, in turn, has helped to create a healthy and competitive ambience, says Jannels. As well as this, rates have been driven down making the opportunities more compelling for its borrowers. Jannel says: “At the ASTL, we have also set a benchmark for high standards amongst our members with our rules and code of conduct, and so we have seen increasing levels of professionalism and transparency across the industry.” A recent survey by Crystal Specialist Finance shows that bridging was identified in the top three of product areas which brokers will specifically focus on in 2022. Berry says that increased competition oﬀered by new entrants has resulted in lower pricing and arrangement fees. Stevens says that he has seen an increase in ethical lenders who have tightened up the lending guidelines to reduce risk for both themselves and borrowers. This has led to cheaper options and lower default rates which together helps to improve the general perception of the short-term lending space. “The code of conduct adopted by members of the ASTL helps to encourage honesty and integrity across the bridging market and in turn helps to reduce the activity of some ‘rogue traders’ in the market,” adds Stevens. While there has been an influx of new entrants to the market, Oatway believes that allowing any new broker to the industry to start using their funding line is a dangerous game. And although there is pressure for bridging → NOVEMBER 2021

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MARKET businesses to get money out the door, Oatway believes it needs to be the right type of business with the right people to ensure longevity. ADDITION OF REGULATION WITHIN BRIDGING The bridging industry has become increasingly regulated with added rules and codes now featuring across the industry. Jannels says that the reputation of the bridging sector has, historically, has been subject to a level of malign that it may not have deserved. “That said, it undoubtedly has improved dramatically over the last decade thanks in no small part to the work of trade associations, like the ASTL, that have introduced rules and codes of conduct for members to operate in a like-minded fashion for the benefit of the consumer,” he adds. As a result of the regulation, all lenders are working to more rigorous levels of oversight and are required to keep up to date with the codes and rules. Following on from the rules set by the ASTL, Morris says that Precise Mortgages’ goal was to bring a regulated approach to both regulated and non-regulated products, with the same terms and conditions that you would find on the high street. Jannels says that whether or not a lender is regulated by the FCA or the PRA, all lenders must work within the guidelines of ICO, AML and GDPR rules. Because of increasing regulation in the market, regulatory influences and the initiatives of trade associations, bridging is already regarded highly, Jannels adds. Cowboy finance The term ‘Cowboy’ finance was commonly used to describe the bridging industry in its early days due to the lack of rules and the ability for lenders to operate in whatever fashion they saw fit. It is a description the bridging industry has been seeking to shake, especially in recent years; Oatway says that the culture has changed and he cannot remember the last time he heard any accusations of a broker or lender being cowboys. He says: “Experienced property investors who require flexibility and speed from their funding partners see bridging finance as an essential tool. “The industry now takes pride in what it does and there is a collective mindset of always wanting to improve their work and their product offering.” Bodenstein believes the change in how the bridging industry is viewed can be assisted most by the ASTL promoting the industry and by identifying firms who continue to act in an unethical manner and exposing their actions and activities. As well as this, Bodenstein thinks that the industry’s image would also benefit from greater media support. He says: “The personal finance media, along with the weekend and home supplements, have all been www.sfintroducer.com

supportive in their own way, helping to communicate the enabling role that bridge lenders can play, but we need to see more.” Through this, Bodenstein believes this would go a long way in dispelling the ‘Cowboy’ view that so many to this day associate with the bridging industry. SIMPLIFYING BRIDGING Bridging is a topic often viewed as complex, however Jannels says that bridging does not have to be any more complicated than any other secured borrowing. Although as it does remain a different product to standard term mortgages, with different lenders and different considerations, Jannels believes it is best that brokers who are unfamiliar with the market should consider partnering with an expert. This can do two things to help grow the market. Firstly, ensure that any current business is properly transacted and, secondly, provide skills and knowledge to bring the learning partner forward to manage their own business. Stevens explains that bridging is simply a short-term loan to enable a purchase, any cost is a relative cost to the overall plan and the cost of finance must be considered as a business cost. He says that a borrower will need to know how the bridging loan will be repaid and this is normally by a remortgage or the sale of the asset. This should take place as soon as possible to reduce the overall cost of the bridging finance. He says: “I don’t think there should be any nonbridging brokers. Bridging acts as a retention tool for an broker’s existing client bank and also opens up opportunities to add clients. “As stated above, many bridging loans will be paid back with a remortgage which is something brokers can assist with, when the time is right.” Bodenstein believes that the real challenge within the bridging market lies in creating greater awareness of what lenders can do and how they do it. “It is the ill-conceived perception of our industry that makes it so complex, and this again, is where we need all the support the ASTL can muster,” he adds. Morris says: “I know it’s easy for me to say, but bridging really is a simple product, it’s a case of using it for the first time and having that light bulb moment where you realise it’s not complicated at all.” Bodenstein believes the view of bridging being complex is related to awareness and shows the need for a greater understanding of the market from brokers. He says that business development managers have a vital role to play in creating that awareness, working closely with brokers to understand their market and their client types, and helping the broker to understand the full range of solutions a lender can bring to the table in helping them to close on a deal. Oatway is of the view that bridging should not be simplified to enable easier access from non-bridging brokers. → NOVEMBER 2021 BRIDGING INTRODUCER

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MARKET He says: “When used in the right way it is an effective tool but when used incorrectly it can have disastrous results for both the lenders and clients. “This should remind them that to maintain a strong relationship with their clients, they are better bringing in a specialist alongside them to deliver exactly what the client needs rather than to potentially damage a relationship by trying to do everything themselves.” Jannels says: “If a broker’s key focus is not bridging lending, they may decide to refer a case to an expert who is immersed in the market and has an up-to-date understanding of lenders and criteria.” Berry says it is crucial that brokers either upskill or partner with experts in areas which sit outside of their normal practices. “This means brokers can still be perceived by their clients as delivering holistic support even if they are only acting as a facilitator for some products,” he adds. Looking to the benefit of referrals or partnering with an expert, Oatway says brokers will often get enhanced procurator levels, so not only will it lead to more deals being closed but a non-bridging broker is likely to see more income overall as they will typically be paid a healthy introducer fee. Bodenstein also points to the benefit of a fee payable by the lender on completion for the broker. However, he says the support a lender can give to a broker in securing a longer-term relationship with that client, offering solutions that work both in the shortterm and longer term, is more important than a fee. Jannels says: “The benefit for brokers is that they can help their client to find a funding solution. “They will mostly retain ‘ownership’ of the client and so can help source longer term finance further down the line.” EDUCATION OF THE MASSES Education underpins many of the previous topics covered above and shows that there is a need for it. Jannels says that the ASTL is working with FIBA and the London Institute of Banking and Finance on a programme of education that can provide practical knowledge to brokers who are looking to upskill in the sector. Morris says: “That while the reputation of bridging finance has come on in leaps and bounds, borrowing Tony Blair’s words, the key is education, education, education.” He explains that the more brokers and customers are educated about the benefits of bridging finance, the more it will be recognised as a viable source of alternative finance. Precise Mortgages hold regular workshops explaining how bridging works and its business development managers can provide one-on-one support. Berry is expecting transaction volumes for bridging to be at record levels in 2021, and as a result he believes

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furthering education is important to helping support the demand. Morris believes it is vital that brokers put aside a certain amount of time each week to keep themselves educated about what is happening in the market and also what is coming up so they can have informed conversations with their clients. Berry says: “Education amongst the broker community is improving and although more can still be done, a widening knowledge is evident within our sector. “It is however, misunderstood, and can incorrectly be seen as expensive, although this is not the perception of the professional investor who very much sees bridging as a wealth creation product.” Stevens thinks that the continued education

“At the moment, no qualifications are needed, not even the basic mortgage qualification. A generic bridging qualification along with various additional modules would prove to be a step in the right direction” around the short-term lending market, the products available and the scenarios where they can help, is vitally important. He also believes that education and diversification in the broker space is hugely valuable for those who are prepared to consider it. Oatway says that bridging finance is a specialist product that should be accessed only by those with a high level of understanding, as otherwise it risks it being used in the wrong way. He believes that although the industry has come a long way and has now built a strong reputation, it could still do more and creating qualifications to be able to trade would be a step in the right direction. He says: “At the moment, no qualifications are needed, not even the basic mortgage qualification. “A generic bridging qualification along with various additional modules would prove to be a step in the right direction.” As a result of the lack of qualifications, Oatway says many non-bridging brokers regularly fail to get transactions across the line as they do not have the correct skillset or knowledge. He says: “Education has considerably improved with the numerous publications and trade bodies keeping the industry up to date with the latest news, products, exclusive stories and roundtable events. “The next step is to get a qualification process in place. This will take time but it is essential for the industry to keep moving in the right direction.” B I www.sfintroducer.com

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Changing needs in a changing world Jake Carter outlines the discussion at Bridging Introducer’s recent round-table, which looked at the impact of the pandemic, changing needs in the industry and the role of technology

s the world recovers from the impact of the pandemic, the market has been shaped by high demand for housing, changing commercial needs and increasingly complex transactions. The pandemic has changed the specialist finance market, as well as the whole industry, through altering the needs of the average person. Demand has been at the forefront, but the pandemic has caused additional complications in transaction processes and amended the need for commercial space through the requirement to work from home for many.

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“Investment banks are desperate to be in the shortterm space, I think they see it as a good asset class to be associated with, which draws in high returns” RICHARD WHITEHOUSE www.sfintroducer.com

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“We cannot predict everything, but having foresight about where the potential issues may be and raising them early on in the deal will result in everyone being more efficient” CHRIS OATWAY In this round-table discussion, Bridging Introducer asks representatives from Sancus Lending Group, Movin Legal, Castle Trust, Roma Finance, CrowdProperty, LendInvest, Grey Matters Specialist Finance, LDNfinance, City Finance Brokers, Black Book Finance and VAS Panel to provide their views on specialist finance and bridging and development markets. KEEPING UP WITH DEMAND Discussing whether the market is ready to keep up with the increased demand, Richard Whitehouse, director of Sancus Lending Group, says: “There is lots of capital around within the market right now, which is a real positive. “Investment banks are desperate to be in the shortterm space, I think they see it as a good asset class to be associated with, which draws in high returns. “If this level of demand does continue to rise, the market has the raw material to be able to cope.” Whitehouse also explains that with the rise in demand, lenders are having to increase staff numbers to keep up, and he emphasises the importance of hiring the right people for the job. The importance of the recruitment process is not lost on Daniel Owen-Parr, non-executive director of VAS Panel and he says: “The average age of a valuer is now around 60. “2008-2009 decimated the valuer market as it wasn’t seen as an attractive area of the industry to get into. “As a result of this, the market has been playing catchup ever since, trying to recruit new young graduates.” However, Owen-Parr does not expect to see a push for these graduates from the surveying industry in the near future. Looking back to how the market is keeping up with demand, Emma Hall, business development manager at Movin Legal explains that on the legal side of the market, it has become merged technology more than perhaps it should have been. She says: “There has been a lot of pressure on the market from the stamp duty holiday and people working from home. “This has meant technology has needed to adapt quickly to be able to cater for the rise in demand and the shift in the way of working.” www.sfintroducer.com

Hall explains that she has seen many people on the legal side switch from entire folders full of paper to being completely paperless with the help of technology. This is turn has helped speed up the legal side of a finance deal in line with the rise in demand. DELIVERY AND CERTAINTY Over the past year and a half, everyone has had to get use to uncertainty and change, with this, and in the context of increased demand and activity, Whitehouse says: “The pressure is on all lenders to adapt and respond to deals within a timely manner.” Whitehouse explains that in order to provide certainty, lenders must triple check all aspects of a case before progressing with it. “We all have the technology to be able to assess an individual case before taking it to the next stage, so there shouldn’t be anything which trips lenders up or goes unaccounted for at the initial part of the delivery”, he adds. Scott Marshall, managing director of Roma Finance says that it is all about understanding the customer’s objectives and helping them to achieve what they set out to do. “As lenders we can hide behind brokers, valuers and lawyers, but the closer we get to really understanding the customer, the easier it becomes to avoid any issues which might arise during the transaction,” Marshall says. Chris Oatway, owner and director of LDNfinance says that it is a two way street; on the lenders side,

“As lenders we can hide behind brokers, valuers and lawyers, but the closer we get to really understanding the customer, the easier it becomes to avoid any issues which might arise” SCOTT MARSHALL they have got to know their own criteria and whether deals will be accepted in different departments. And on the brokers side, they have got to know their lenders and place customers correctly in order to delivery finance well and with certainty. Oatway says: “We cannot predict everything, but having foresight about where the potential issues may be and raising them early on in the deal will result in everyone being more efficient.” MAINTAINING POSITIVE RELATIONSHIPS There are inevitably going to be some transactions where new information comes to light, or requirements are forced to change part way through a deal and Danny Robinson, director of Grey Matters Specialist → NOVEMBER 2021 BRIDGING INTRODUCER

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“Brokers need to step up too, I would say that 85% of the brokers that we see shouldn’t be in the industry because they don’t know what they’re doing” DANNY ROBINSON

Finance says that it all comes down to transparency. Looking at the relationship between brokers and lenders, Robinson says: “If lenders understood the position of lenders better, I think it would improve the process. “A no from a lender is fine, but if it comes two or three weeks down the line then it is no good to anybody.” As a master broker, Robinson says: “Brokers need to step up too, I would say that 85% of the brokers that we see shouldn’t even be in the industry because they don’t know what they’re doing.” Business development managers also need to improve standards, according to Robinson, and he adds that in order for the process to run smoothy, all parties involved need to work in harmony. Ross Sheppard, business development manager at Castle Trust says as a business development manager, he agrees with Robinson that standards do need to be raised. “Business development managers need to pick up the phone and speak to brokers to try and clearly understand a customer’s application in order to take it to the next step,” Sheppard says. Maintaining relationships requires good communication, and Owen-Parr explains that it is essential each cog in the process speaks with one another throughout the journey. Michael Clapper, founder and chief executive of Black Book Finance says from his perspective, lenders could be clearer in their definitions. He says: “Some are very clear and cases progress with speed, but others change their standpoint on certain aspects of a deal part way through without providing a clear reason as to why, which then can result in it collapsing. “Clarity up front would save so much time and money for the entire market, and this is where I can see room

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for improvement in terms of relationships.” Communication is a key part of any relationship and Marshall says: “It is also important for the customer to be clear with exactly what they want and how they intend to achieve it. “This then helps the broker which in turn helps the lender, and everyone else involved in the process.” ADVANCEMENT OF TECH The role of technology has been developing due to the pandemic, but there is a fine line between the use of tech and the human element of decision making. Mike Bristow, chief executive and co-founder of CrowdProperty explains that the use of technology allows swift responses during key stages of a deal. This in turn improves standards and customer satisfaction, as they are able to get answers to important questions quickly. Bristow says: “We are a development finance specialist, you cannot create an algorithm for development finance, but what you can do is deconstruct every element of the process, deconstruct every bit of information flow required. “You then assign aspects to technology for efficiency or to human expertise for effectiveness.” If you blend both technology with human expertise, Bristow says you can provide better customer outcomes. Taking this one step further, Bristow says that at CrowdProperty there are machine learning and AI models running in the background that are becoming increasingly accurate at predicting development outcomes. This does not replace the human element, but it assists with prioritisation. “All of this assists intermediaries with helping their customers which ultimately helps them in what is a competitive market,” adds Bristow.

“Clarity up front would save so much time and money for the entire market, and this is where I can see room for improvement in terms of relationships” MICHAEL CLAPPER

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“We at Sancus Lending Group have been noting down data on all our properties of their ESG ratings and conveying this information back to our funders” RICHARD WHITEHOUSE Justin Trowse, director of bridging finance at LendInvest explains that as LendInvest is a fintech company, it uses technology to increase efficiency during each step of a customer’s journey. He says: “Front office portals reduce human error and speed up service levels and delivery, which is great for fairly simple and small bridging transactions.” However, for large scale operations, Trowse says technology is essential as it enables people to get through the process quickly and accurately in greater quantities. For larger and more complex deals, such as development finance, refurbishment and structured finance, these require a much higher degree of human input, therefore Trowse says LendInvest keeps these products off-line, but utilises tech integrations in its back office to make things slicker. “Integrations are becoming a big part of adding a large amount of operational value within property finance. The businesses that have not adapted and started to look down this avenue are typically those that are lagging behind in market sentiment,” adds Trowse. Looking to the valuation market, Owen-Parr says: “The issue here is that the valuation market is not at the forefront of technology. “Through the Royal Institute of Chartered Surveyors (RICS), there needs to be some kind of way of adopting technology into this area of the market.” Drones have been increasingly used to video a property in recent times, which is largely due to the pandemic halting physical valuations from taking place. Owen-Parr says that many valuers follow the more updated technology friendly template, however there are still a few which are scanning in their valuation and sending it to lenders which is causing delays. Hall says: “The legal side of the market is behind where it should be in terms of technology.

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“The problem is nobody is on the same wave length, the market is all on different trains to the same location when it comes to technology.” Lawyers deal with a lot of third parties, Hall points to the use of local authority searches and says there are over 400 local authorities which all use a different computer system. “Linking everything up isn’t as quick and simple as some may believe, and it is going to take a long time before technology is up to speed on the legal side of the industry,” says Hall. COVID has forced those involved within the industry to utilise technology more, which Hall says has been one of the few good things to arise from the pandemic. Bristow says: “The legal side of the process is governed by the slowest, which pulls back completion times and effects the entire process. However, the pandemic has meant that processes have sped up through the use of technology, which is one positive to take away from it.” It is important that lenders have systems in place which work for both the technologically advanced and the not so. “Utopia is where everybody’s systems are interconnected through APIs, but we are miles away from this,” Marshall adds. Bristow says: “Technology in the past has been built for the sake of it, a software engineer enjoying themselves, but it needs to be paired with human expertise to take things forward.” However, Simon Kelly, private client adviser at City Finance Brokers, says: “I do think some lenders have gone a bit too far with their technological processes, as they now can’t revert back to a more manual normal approach, particularly on ID checks where they use apps.” Kelly explains that for the older generation, the →

“We are a development finance specialist, you cannot create an algorithm for development finance, but what you can do is deconstruct every element of the process” MIKE BRISTOW →

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BRIDGING forced use of technology isn’t necessarily a good thing as some of them struggle to understand it and use it. It is common knowledge that the older generations tend to be less technologically advanced, so it being a requirement for all customers to use technology may not necessarily speed up the process in all cases. LABOUR AND MATERIALS One of the key issues facing development, refurb and conversion projects is increased materials costs and shortages, and the same for labour. Trowse says that it is essential for lenders that projects make commercial sense before progressing with a case. He explains that lenders must ensure that adequate experience is surrounding the project and sensible contingencies are built in. “Stress testing all the metrics from construction costs to planning and build programmes to end values, is essential before starting on a project,” Trowse adds. According to the Office for National Statistics’ latest construction material price indices, the cost of materials for new housing rose by 19.8% in the year to the end of July 2021, while repairs and maintenance costs were up 23%. The month-on-month increases for July also rose, up 5.8% for new housing and 6.7% for repairs and maintenance. Kelly says: “There is still a huge shortage in housing and I’ve seen a lot of lenders over the last 15 months shy away from lending on flats for development finance. “Development finance lenders are looking more towards lending on houses rather than blocks of flats purely for the outside space.” With the pandemic causing the resulting lockdowns across the country, the need for outdoor space is something which quickly became important for customers.

“The problem is nobody is on the same wave length, the market is all on different trains to the same location when it comes to technology” EMMA HALL “

“I do think some lenders have gone a bit too far with their technological processes, as they now can’t revert back to a more manual normal approach, particularly on ID checks” SIMON KELLY “

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As well as this, with the complications on lending on flats due to EWS1 forms and other cladding related issues, many lenders have began shifting away from this property type. Kelly adds that while there has been a shift towards housing over flats, there are still developers building flats and lenders lending on flats. BROWNFIELD SITES Rishi Sunak recently announced a £1.8bn investment in brownfield site development, and a general increase in investment in housebuilding, Kelly believes this will allow for developers to shift away from building flats and be able to offer bigger houses. Trowse says: “Realistically, there are very few funders in the market that support the early stages of the planning process.” Looking to the investment by the government, Trowse adds: “We’ve been in this area of the market for some time and see this as another welcome boost to the industry.” The funding could enable up to 160,000 homes to be built on derelict and unused urban plots. Within the overall fund, £300m of locally led grant funding will be awarded to mayoral combined authorities and councils to unlock smaller brownfield sites for housing. Trowse says that typically these sites need to have adequate upside to offset the cost and risk of getting in early. The new brownfield housing grant will come alongside a £9m fund with which councils can create tennis court-sized urban ‘pocket parks’. As well as this, Rishi Sunak will put forward £65m of investment to support the digital transformation of the planning system through the development of new software. “I would like to see more government support for

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BRIDGING non-bank funders, as usually they first offer incentives to the deposit takers who don’t want to participate in the high risk part of the property market,” Trowse adds. LOOKING TO 2022 When looking to key trends that are on the horizon which may affect the bridging and development markets in towards 2022, Owen-Parr points to the green agenda and says: “We have all seen the Prime Minister’s recent launch of heat pumps and I think we are only going to see more of these sorts of announcements.” The government has offered a £5,000 grant for homeowners to replace gas boilers with low-carbon heat pumps across England and Wales. This is part of a £3.9bn plan to provide 90,000 pumps to reduce carbon emissions from heating buildings. Owen-Parr adds: “Lenders need to be aware of where this is going from a customer’s point of view, with the rise in demand for energy efficient housing.” Whitehouse says that lenders are increasingly under pressure from their funding lines to report a property’s ESG credentials. “We at Sancus Lending Group have been noting down data on all our properties of their ESG ratings and conveying this information back to our funders,” says Whitehouse. Trowse says that ESG will continue to be a key focus for investors, which will filter to lenders and larger intermediary and professional partner businesses. Bristow confirms that at CrowdProperty, they are also keeping track of all its property’s ESG ratings and he believes this will continue into 2022 and become the norm going forward. He says: “I believe this will become built into criteria through people increasingly wanting energy efficient properties, as well as government incentives and requirements involving green homes.”

“We have all seen the Prime Ministers recent launch of heat pumps and I think we are only going to see more and more of these sorts of announcements” DANIEL OWEN-PARR

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“I would like to see more support for non-bank funders, as usually they first offer incentives to the deposit takers, who don’t want to participate in the high risk part of the market” JUSTIN TROWSE Despite this expected rise, a poll by Countrywide Surveying Services (CSS) found that 94% of brokers are yet to sell a green mortgage product. However, 39% of lenders suggested that they will have a green mortgage offering in place by the end of 2021. As well as this, the CSS data shows that 92% of surveyors reported that they are still yet to value a property with an Energy Performance Certificate (EPC) rating of A. Looking ahead to other rising trends in 2022, Whitehouse predicts a retraction in the race for space. He says: “As many are now being asked to return to their offices in central London, I can see a lot beginning to regret their decision to move to the other end of the country. “As a result, I expect that we will start to see the purchase market in the Home Counties and London begin to creep up again.” Bristow says that it is important lenders are nimble and can alter their decisions based on current market trends quickly, this way they can cater for everyone’s needs at any given time. Something which goes handin-hand with a return to big cites is developers resuming building flats and lenders lending on flats. Whitehouse predicts the hiatus is only temporary and that there will be a return to this part of the market next year. Looking to other potential trends next year, Whitehouse adds: “I believe inflation and supply chain issues will continue to be a problem into 2022, which has a knock on effect on many other parts of the industry.” Trowse also believes that costs are still going to rise and that there will be supply chain issues running into next year. However, he concludes: “What is apparent, everywhere you look, is that the property market is still booming.” B I

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COVER

INTERVIEW

A different approach Jessica Bird and Dan Walker, UK MD and deputy CEO of Sancus, discuss the business’ heritage, expansion and approach to lending in an increasingly complex market For those who might not know the business yet, can you describe Sancus’ proposition?

Sancus is an AIM listed alternative finance business providing debt finance to property professionals across a number of jurisdictions, including the UK, Ireland, and the offshore markets of Jersey, Guernsey and Gibraltar. The business began operations in Jersey in 2013, and was founded on the proposition that many traditional lenders had retrenched from the market in Jersey, just as they had in a number of other places, and that represented an opportunity for non-bank lenders to step into the breach. Jersey was pretty fertile ground for the alternative finance model in the sense that what you have there is both a good source of high net worth (HNW) individuals and family offices who are looking for yield and are attracted by the riskadjusted returns available through private debt, and equally a good source of borrowers who are often entrepreneurial and asset-rich but have a liquidity or cash requirement in order to take advantage of some of the opportunities that come before them. So, the co-funder cohort began in Jersey and now comprises individuals, family offices and small institutional investors across several jurisdictions, and still remains an important part of the funding mix for the Sancus business. What other resources make up your diverse funding proposition? Sitting alongside these co-funders are our larger institutional funders providing revolving credit facilities and forward flow financing arrangements. We also have a loan note programme for cofunders who prefer exposure to a diversified portfolio of Sancus-originated loans, rather than selecting individual loans. This diversity of funding is key to sustaining the growth of the business and ensuring we can support borrowers across different products. While there is some variance around the risk

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appetite among these different funding sources, what unites them is that what they each care about of course is that Sancus has carefully considered each loan opportunity and provides effective servicing of the loans to ensure best outcomes are achieved. What drove Sancus’ expansion further into mainland UK? The heritage of the business is in the Channel Islands, and the model that was developed in Jersey was then successfully exported to other jurisdictions with similar dynamics, such as Guernsey and Gibraltar. We still think there’s plenty of potential to further grow Sancus’ presence in these markets. The challenge we’ve set ourselves is to deliver the same success in larger scale jurisdictions such as the UK and Ireland where we also see tremendous opportunity. We’re in our second full year of operations in the UK and established the business in Ireland a year earlier and are seeing strong growth in both markets, with the severe housing shortages underpinning the demand for residential property finance. What fundamental tenets underpin Sancus’ approach to lending? I was pleased to see a testimonial from a client recently, which described us as ‘tenacious’, which is how we’d like the business to be perceived and very much represents the approach we take to each loan opportunity. Surveys among brokers consistently show that what they care about most in a lender is the quality of service they can provide. That covers many things, most critical among them being speed, simplicity and transparency. More than any other factor, delivering on these is about having the right people in place. It remains a relationship business, it’s about forming long-term www.sfintroducer.com

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Dan Walker partnerships with brokers and borrowers. Conversion rates are of course relevant in measuring our performance but more important, in terms of measuring the quality of service we’re providing, is our repeat business rates – the extent to which brokers and borrowers return to Sancus. We’ve seen this time and time again in the offshore markets where we have many repeat borrowers and we’re starting to see the same in the UK and Ireland too. How does that manifest in the day-to-day? In our people and our approach. If you look at the team, what you’ll see is a group of individuals who are both capable and who care, and that’s something that comes across from the very first interaction a broker will have with Sancus. They’re talking to people who have been around the block, who appreciate what it’s like to be in their shoes, and who are determined to find a way through. We’re also acutely aware that each jurisdiction has its idiosyncrasies, so our model is to have www.sfintroducer.com

experienced people on the ground in each location who are building the broker and borrower relationships which are the lifeblood of the business. What do you think makes Sancus stand out from other lenders when it comes to processes, decision-making and approach to lending? Brokers and borrowers engaging with Sancus can expect a grown-up conversation around their loan proposals, our approach being one of empowering individuals within the business to take decisions, not based on a matrix but rather on the facts in front of them. We understand that speed is of the essence for the client, which is why any of the team can call a credit committee same day and get decisions in real time. What does Sancus’ average borrower or deal profile look like? We have a diverse mix of borrowers and deals, → NOVEMBER 2021 BRIDGING INTRODUCER

COVER

INTERVIEW so I’m not sure there is a ‘typical’ profile, but I think what you would see in our loan portfolio – and in the pipeline – is a range, from those who may be relatively inexperienced and early in their careers as property professionals, perhaps purchasing their first investment property at auction, to highly experienced developers looking to complete a multi-unit ground up development project. The asset or the project are important, of course, but when it comes to the borrower, we’re looking for somebody who we can work well with, particularly in the context of a development project where issues frequently arise and call for a collaborative approach. How did the business cope with the upheaval of the pandemic, and will you be taking any lessons from this period moving forward? We were pleased that we could continue to operate through the pandemic without any significant impact as far as our existing borrowers or funders were concerned. We maintained service levels and the business adjusted very quickly to a working from home environment. Communication among the team was key during this period and while we couldn’t get together physically, we remained in close contact through Teams to ensure the effective flow of information. Like a lot of businesses, we expect to adopt some form of hybrid model of home/office working going forward. We made a conscious decision to keep going and to continue to support good borrowers through the crisis. We were able to do so because we had the variety in our funding sources I mentioned earlier and managed to forge some very meaningful broker relationships during this period, often stepping in where others were unable to. Did you have to change your lending appetites or approach to particular areas of the market during this period? Core business for us remains residential bridging and development lending and while there were concerns around the potential affect on house prices and sales activity, the impact was felt more keenly in the commercial property space. Of course, we were very focused on modelling some of the sensitivities around each loan proposal, in particular to reflect the potential escalation in costs, delayed completion of developments, and the knock-on effect in terms of sales timelines. So, we were more mindful of these sensitivities and the scenarios that may unfold but there was no fundamental change of focus or appetite.

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To what extent does technology play a role in Sancus’ proposition? We’ve developed a proprietary loan management system which supports the execution and management of the loan portfolio and a platform which allows funders to access loan opportunities and loan information and reporting. We have further tech initiatives underway including greater integration with third-party technology systems to help automate process and providing an interface for brokers and borrowers to apply for and manage their loan applications. These are intended to improve the customer experience and will be important in scaling the business but what we don’t want is for that to get in the way of the relationships that we’re building. Looking at market trends, what are some of the challenges facing the development market, and how have you factored this into your approach to deals? We are witnessing supply chain issues, labour shortages, and an escalation in costs as a result. These are all things we’re very mindful of when we review any loan proposal and will engage with borrowers to ensure they have properly considered these potential head-winds. We are seeing some evidence of this in the existing loan portfolio and are working in partnership with borrowers to support them in getting projects to completion and eventual sale, because that’s what will deliver the best outcome all round. It will be interesting to see whether these trends will drive some efficiencies, perhaps leading to more modular construction and manufacturing. That presents an opportunity for a business like Sancus that is willing to look at proposals that maybe fall outside of more conventional or mainstream bridging or development finance. What is Sancus’ approach to the growing topic of green finance and environmentally friendly development? It’s widely acknowledged that if the government is going to hit the zero emissions targets that it has set, it will only do that through delivery of new housing stock meeting the latest environmental standards and built using sustainable methods of construction. As a business that is supporting small and medium sized (SME) housebuilders to address the housing shortage in the UK, we feel we can make a positive contribution here. This is important to many of our funders and other stakeholders www.sfintroducer.com

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INTERVIEW who are increasingly keen to understand our environmental, social and governance (ESG) credentials. Are there any other key trends facing the bridging and development space? We are seeing a lot of conversion projects, often commercial to residential, from high street retail floorspace and offices as developers seek to re-purpose these spaces. In many cases, they are able to take advantage of the enhanced permitted development rights (PDR), and we are well placed to support them in that. Are there pitfalls with those kinds of conversions, which people need to be aware of before entering into a transaction? The devil is in the detail on every construction project but a conversion doesn’t to my mind represent a fundamentally different risk proposition to any other development loan opportunity that we might consider. In each case, understanding the build programme and exit is the focus. You’ve spoken about needing the right people in place, so what is Sancus’ approach to building out its team? Our growth plans centre around making sure that we’ve got the right people in the right places. Probably the most important decision that a business such as ours has to make are around the people that it hires. We have 30 people across our five locations and have recently recruited six more people into the origination teams in the UK and Channel Islands, with more to come. We’re also expanding the team in Ireland. In each case, we are very much focussed on bringing in experienced individuals, people who have a track record and share our commitment to provide a compelling proposition to the borrowers and brokers that we serve. The pandemic has changed some of the usual dynamics around hiring. To some extent it has opened up a wider talent pool, less limited by geography. Equally, the efficiency of remote meetings has meant we’ve broadened the selection process, so candidates get to meet more of the team they would be working with. As a relatively small team, the “fit” aspect of hiring – the ability to get on with each other - is critical. Of course, it works both ways in the sense that it’s a good opportunity for a candidate to work out whether Sancus is for them. We are in in the market to find great people, who www.sfintroducer.com

will typically have several options to choose from in terms of their next career move, so we have to sell ourselves, and I’m really pleased with those who we’ve managed to bring into the business. What key developments are on the horizon for Sancus? Right now, we are really focussed on successfully executing on what we’ve set out to do - scaling bridging and development funding in the target markets where we currently have a presence and building key relationships with brokers and borrowers active in this space. As a business, we’ve demonstrated an ability to take a product and successfully export it into other jurisdictions. It’s a big world out there but, for the moment at least, we think there’s plenty to go after within our current geographies. There are undoubtedly lots of opportunities out there in terms of new products or longerterm lending but, as things stand, we’re happy to lend against land, fund ground-up development projects, provide finance for heavy or light refurbishment, or lend against finished property. Again, we think the opportunity in this existing product range is huge, particularly if we’re prepared to be flexible. We recently completed an air space scheme for a developer exploiting an opportunity to build on top of existing roofspace. That’s a relatively new sphere of activity that has been somewhat spurred on by the pandemic and we were happy to be able to support the borrower on that scheme. What key message do you want to leave brokers with about working with Sancus? I’d encourage them to give us a call or talk to those who have worked with us – I think they’ll like what they hear about the user experience, not just at the very beginning of a loan, but through its lifecycle. We are here to support property professionals, the idea being that they spend less time having to think about how they arrange their funding and more time on growing their business. That’s absolutely why we exist. It is not sufficient these days to just turn up with the cash – there are plenty of lenders out there who can do that, but we like to think of ourselves as a ‘lender plus’. While non-bank lenders such as Sancus are stepping into the space left behind by many of the traditional banks, it’s still frequently the case that borrowers will simply go to their high street bank first and never look beyond that, and often that’s the end of the road. Brokers are absolutely key to unlocking this potential. B I NOVEMBER 2021 BRIDGING INTRODUCER

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IN OUR OPINION

Certain delivery and straightforward finance The newest members of the Sancus team share their thoughts and expectations for the current property market

It is going to be very interesting to see how the pandemic affects the property market in the long-term. However over the last year or so I have been astounded by the number of new entrants into the market in terms of investors. Many of these entrants represent very credible purchasers for residential business acquisitions, pursuing opportunities to buy below market value or attracted by the yields on offer, for example from HMO’s. Following government backing, the social housing market has most definitely come back into the spotlight. This, combined with the drive to house homeless people during the pandemic has highlighted a significant need in our communities. I feel more money and energy has been allocated to support these areas, thus driving an increase in demand. Property investors are seeing these as long-term investment opportunities, often managed and run by independent bodies, with investors benefitting from both good returns and growth in property value.

IMPACT ON CONSTRUCTION In the construction and development sector we have seen some continued growth, although it has been a difficult time for all. The hike in building and material costs due to import duties, increased logistics costs and capacity has affected everyone’s bottom line. However the need for housing and often family size housing continues to grow and, notwithstanding these challenges, I expect construction output to respond in order to meet this demand. THE ESG ANGLE I have attended several forums and conferences which have addressed the shortage of housing across the UK and am seeing real innovation with developers looking to use alternative build methods and materials, in keeping with the government and local authority green initiatives and efficiencies. These homes, including nonstandard construction and modular builds are now becoming much easier to fund through development to long term mortgage for the end tenant. The emphasis on ESG (Environmental, Social and Governance) requirements throughout the industry will become more prevalent and indeed a requirement

Mel Fourie (head of sales, North) Fourie (pictured) joined Sancus in September 2021. She is an experienced finance professional with over 20 years’ in the industry. She has worked for Together where she built out their national non-broker strategy including National Strategic Partnerships in specialist property finance. Before Together she worked for Ratesetter in their specialist property team and prior to that held various roles over a long tenure at Barclays Bank.

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IN OUR OPINION throughout the whole supply chain to end product in the future and will play an increasingly larger part of the mix. CHANGING HOW WE LIVE AND WORK Commercial property has been a very interesting space, we have seen the mass exodus from large office requirements due to people working remotely, creating a national rethink for many companies on how we all operate more effectively. This has subsequently led to more need for serviced offices, shared space and “think tank” office space looking for funding. People are now returning to work with the expectation of a new concept and different experience. NEW LOOK AT DEBT As the government funding support schemes begin to wind down, there is an increase in the need to restructure debt. Those with underlying property assets have the best opportunity of getting the cheapest borrowing and are starting to reach out to obtain a sensible long-term approach to their business’s debt. CAMPUS LIFE Student accommodation had an intermittent halt as the university and colleges deployed people home. However, many of these young people are now desperate to live out their student life on and around campuses, so we are seeing some increased appetite in this space, both on conversion of houses to accommodate student living and ground up developments. COMMERCIAL TO RESIDENTIAL Over the last year or so I have seen a large increase in the amount of commercial to residential conversion projects. I believe there is still huge opportunity in this area and do not expect a reduction in interest in this space anytime soon. Due to our in depth understanding of the development sector, Sancus are very well positioned

to help assess and ultimately fund many of these conversion projects. THE UK HIGH STREET With the ongoing changing shape of the UK high street and the move to more working from home, recent changes in the work/home habits there seems to have been a change in people’s requirements to be accommodated both residentially and commercially. Whether it be the increase in high street residential units, smaller multi occupancy office space away from the city centres, or in many cases a mixture of both residential and commercial space within the same unit. Sancus has plenty of experience of these types of projects and are happy to consider funding those with a residential or semi-residential element. FUNDING THE CHANGES Recent changes to development permissions and many buyers’ proviso of increased space to accommodate more working from home has seen many funders stepping in to help developers realise these new opportunities. There are a number of different types of funding available for these projects, from straightforward bridging to light refurbishment, heavy refurbishment and then development finance. These categories are not necessarily all catered for by all funders in the market. Some will be looking to assist with the bridge or light refurb element, others will step up to assist with the heavy refurb and development requirements. WHY SANCUS? Sancus can help with every stage of the acquisition and development process, from bridging finance to ground up development through to heavy structural work, offering speed and simplicity with the aim of completing the transaction in a timely, efficient manner. The experienced team offers certainty of delivery and straightforward financing options, interest is noncompounding, fees are charged on the net loan and we offer very competitive pricing to ensure a satisfactory outcome for clients, introducers, and ourselves. B I

Jaxon Stevens (head of sales, South) Stevens (pictured) joined Sancus in October 2021. He has nearly 25 years of experience in financial consultancy and management roles with a proven track record in building high level B2B relationships and has managed teams nationwide. Prior to joining Sancus, Stevens was at Omni Property Finance where he was responsible for national business development and prior to that, Positive Lending, where he was national sales manager and head of networks. He has extensive knowledge of the specialist lending market and is well connected in the property finance space. BI

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REVIEW

ASTL XXXXXXXXX

Increased need for understanding Vic Jannels CEO, ASTL

rokers active in the bridging market currently will perhaps recognise the requirement for an increased need for understanding. Bridging finance is a fast and flexible solution for clients’ funding requirements, but it is also bound by the necessary processes of secured lending, which in many cases includes the requirement for a physical valuation of a property. As we all know, surveyors are also under a great deal of pressure at the moment. Feedback from the market is that physical property valuations currently have a lead time of between a week and three weeks, with those surveyors who are able to make earlier bookings sometimes charging more for the privilege. Then you need to consider the further potential delays should the valuation come back with diﬀering information or a request for more detailed inspections. In some cases, lenders are able to advance the process with the use of automated valuation models (AVMs), but the properties used as security on bridging lending are often unusual or requiring some work and so, more often than not, a physical valuation is required. It is probably worth pointing out that this is every bit as important for the applicant as it is for the lender!

These delays are the result of pressure being felt by surveyors, but they impact everyone involved in the process, not least the customer. For brokers, it can be frustrating if your clients’ plans are being put on hold, or even at risk by protracted application processes. It’s important to remember that nobody wants the situation as it is, least of all lenders, or for that matter, surveyors. We know that the surveying industry is doing all it can to attract new blood into the profession to help bolster the workforce and better cope with demand. However, that will take time, and in the meantime, it’s important to understand the issues that can happen throughout the chain and to maintain open channels of communication. Greater understanding is something that we are working hard to achieve at the ASTL. We are currently in the process of working with our colleagues at the Financial Intermediary and Broker Association (FIBA) and the London Institute of Banking & Finance (LIBF) on a programme of education that can provide practical use to brokers who are looking to upskill in the sector. We want to create an environment and a culture of greater understanding of the workings of bridging finance and the opportunities it can present, and we think we can do this through a programme of education. Within the programme, it’s our intention to cover basic knowledge on how brokers can structure an unregulated deal in areas such as

A greater understanding of bridging opportunities will open doors

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bridging and development finance. This will include education around fees and how to read a set of terms and charges. In the case of development finance, which is more complex, we plan to cover how the drawdown of tranches works and when money is released. On top of these basics, it’s also important that we increase awareness and understanding of diﬀerent points in the process to facilitate a more collaborative approach to bridging lending that will ultimately benefit everyone involved. For example, communicating the considerations for lenders when they are underwriting an application, or what’s involved in a product change, how long it takes and how the timeframes can impact brokers and lenders. It’s also important to have knowledge about the role of surveyors and solicitors in the process and how to work alongside them to achieve the best results for our customers. The bridging market has performed exceptionally well since the beginning of the year and the last set of ASTL lending figures show that both completions and loan books had increased, whilst the level of defaults had fallen. We face some challenges. There remain question marks over the resilience of the economic recovery and there are presently capacity issues in some areas. But, as we move into a post-pandemic environment, we have a fantastic opportunity to grow our sector and establish a bigger market capable of helping a wider variety of customers. At the ASTL, we believe that we can support and, to some degree, accelerate this process through the implementation of education programmes that generate greater understanding across the industry. We are currently working towards those goals alongside our colleagues at FIBA and we will, of course, keep you posted of any major developments. We all have a great opportunity and with greater understanding, we can make the most of that opportunity. B I www.sfintroducer.com

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