NACFB Magazine - November 2017 by NACFB

Issue 52 November 2017

The magazine for the National Association of Commercial Finance Brokers

Commercial temperatures rise

The speedy recovery of the UK property market since the referendum

In this issue

Is age an issue?

The impact of increasing life expectancy on finance

GDPR

What you need to know now

Offshore lending

Recent trends in borrowing from outside the UK

LOGO

SPECIALISTS IN GOOD SENSE

REGULAR SHAWB ROOK B ANK LIMITED SHAWB ROOK GROUP PLC

Short Term lending from 0.55%

Term lending from 2.99% above 3 month LIBOR*

Ltd companies, LLPs & Individuals

Broad range of security including HMOs & multi-lets

ver the last two months, I have led a series of Members’ and Patrons’ days in London to connect with those who are integral to making the NACFB what it is – and what an illuminating set of days they were. These were the first NACFB events that I attended without my ‘Patron hat’ on.

NACFB News 4-8 8 9

In the news Dates for your diary Notes from our sponsor

Top Story

You will have seen the Members’ day write-up in last month’s magazine and you can also see an overview of the Patrons’ day in this issue (page 46). One topic that came up repeatedly was that of engagement. S TA C K E D ( S M A L L U S E ) SHAWB ROOK B ANK LIMITED SHAWB ROOK GROUP PLC

*Shawbrook Bank applies a minimum floor of 0.75% to the LIBOR rate

The drive for better engagement seems to exist in all forms of modern life, but in our world and within your Association, increasing engagement with you – our Members – is right at the top of my to-do list. This drive to communicate better is not just a one-way street: I’m calling upon all our Members to meet us in the middle and offer your thoughts and views on how the NACFB can work harder to ensure our Members are at the heart of everything we do. There will be additional opportunities to offer feedback throughout 2018.

0330 123 4521

Closer on our horizon is the annual NACFB gala dinner on 30th November. The AGM will take place on the same day and will be the first place to hear how your feedback is helping shape the Association’s future.

or email cm.broker@shawbrook.co.uk

I look forward to seeing you there.

D I S C U S S YO U R C A S E S TO DAY

Graham Toy CEO NACFB

In this November issue

First, thank you to all those who came Commercial Finance along and offered their frank INTERN AT I O N A Lfeedback, ( JERSEY SUBSIDIARY ) constructive guidance and suggestions 10-11 news bites S H A W B R O O K I N T E R N A T I O N A L L I M I T E Essential D for steering the future of your NACFB.

Our business is built on relationships, and we rely on the support of our Broker Partners to deliver transparent lending solutions to the professional investor, landlord and SME community. A flexible approach to both client and security:

Welcome | NACFB OFFSHORE

Investec provides PCF Bank with £15m facility

Introducing 14

Landbay implements new online portfolio submission platform

Case Studies 16

Developer secures 100% funding for Birmingham scheme 18 Tracker BTL loan enables expat portfolio growth 20-21 Asset finance boost for major festival stage 22-23 Overcoming legal challenges for £26m landmark project

Special Features 34-36 Is age an issue? 38 Trends in offshore lending 40 The world outside your comfort zone

Compliance Updates 42-44 GDPR: what you need to know

Spotlight 46-47 Patrons’ day: engaging with NACFB lenders

Industry Guides 48 50

Financing potential Let’s get clear on autobid vs manual

Opinion & Commentary 52-53 Does vehicle finance have an image problem? 54 Leave no stone unturned for a re-bridge 56-57 If I had five minutes with the chancellor 58 Master brokers vital to getting us building

Cover Story 24-29 Commercial temperatures rise

Patron Profile 30-31 Reditum Capital

Ask the Expert 32

Jeff Longhurst

Warm regards, Graham Toy CEO, NACFB

For further information Kieran Jones, communications manager t. 020 7101 0359 Hamilton House, 1 Temple Avenue London EC4Y 0HA Email: Kieran.Jones@nacfb.org.uk

www.shawbrook.co.uk

Vera Sugar, editor t. 0203 818 0171 71 Gloucester Place, London W1U 8JW Email: vera@medianett.co.uk

ADVERTISING & EDITING: Medianett 0203 818 0163 www.medianett.co.uk DESIGN & PRODUCTION: Carbide Finger Ltd t. 0845 812 8206

THIS ADVERTISEMENT IS INTENDED FOR INTERMEDIARY USE ONLY AND MUST NOT BE DISTRIBUTED TO POTENTIAL CLIENTS

NACFB Magazine | 3

LOGO

SPECIALISTS IN GOOD SENSE

REGULAR SHAWB ROOK B ANK LIMITED SHAWB ROOK GROUP PLC

Short Term lending from 0.55%

Term lending from 2.99% above 3 month LIBOR*

Ltd companies, LLPs & Individuals

Broad range of security including HMOs & multi-lets

NACFB News 4-8 8 9

In the news Dates for your diary Notes from our sponsor

Top Story

*Shawbrook Bank applies a minimum floor of 0.75% to the LIBOR rate

0330 123 4521

or email cm.broker@shawbrook.co.uk

I look forward to seeing you there.

D I S C U S S YO U R C A S E S TO DAY

Graham Toy CEO NACFB

In this November issue

Welcome | NACFB OFFSHORE

Investec provides PCF Bank with £15m facility

Introducing 14

Landbay implements new online portfolio submission platform

Case Studies 16

Special Features 34-36 Is age an issue? 38 Trends in offshore lending 40 The world outside your comfort zone

Compliance Updates 42-44 GDPR: what you need to know

Spotlight 46-47 Patrons’ day: engaging with NACFB lenders

Industry Guides 48 50

Financing potential Let’s get clear on autobid vs manual

Cover Story 24-29 Commercial temperatures rise

Patron Profile 30-31 Reditum Capital

Ask the Expert 32

Jeff Longhurst

Warm regards, Graham Toy CEO, NACFB

For further information Kieran Jones, communications manager t. 020 7101 0359 Hamilton House, 1 Temple Avenue London EC4Y 0HA Email: Kieran.Jones@nacfb.org.uk

www.shawbrook.co.uk

Vera Sugar, editor t. 0203 818 0171 71 Gloucester Place, London W1U 8JW Email: vera@medianett.co.uk

ADVERTISING & EDITING: Medianett 0203 818 0163 www.medianett.co.uk DESIGN & PRODUCTION: Carbide Finger Ltd t. 0845 812 8206

THIS ADVERTISEMENT IS INTENDED FOR INTERMEDIARY USE ONLY AND MUST NOT BE DISTRIBUTED TO POTENTIAL CLIENTS

NACFB Magazine | 3

NACFB | in the news Association news and updates for November 2017

We’ve got you on speed dial.

NACFB announces GDPR compliance collaboration with AMI The NACFB has chaired a series of meetings with the Association of Mortgage Intermediaries (AMI) in a bid to pool ideas and resources, and best prepare for the upcoming General Data Protection Regulation (GDPR) due in May 2018. The collaboration enables both parties to view the regulation through the eyes of commercial finance brokers and tailor ongoing guidance towards those who operate specifically within our world. The partnership will be mutually distributing updates over the coming months. The collaboration forms part of the NACFB’s commitment to preserving the integrity of our membership and ensuring that we leap regulatory hurdles together. Industry regulation is only heading one way, and we want all our Members to remain

4 | NACFB Magazine

both ahead of the curve and fully compliant. To this end, earlier this year, we launched a bespoke, inhouse NACFB Compliance Services consultancy team, providing support aimed solely at our commercial finance broker Members. We are therefore offering a free telephone compliance consultation regarding our services, with our expert team, to all NACFB Members. You can subscribe to NACFB Compliance Services for only £40+VAT per month. This gives you access to a model office

suite of tailored documents, discounted national workshops, full access to helpdesk consultants and free access for one person to our MyNACFB training and education system for one year.

Getting you finance isn’t the only thing we’re quick to do. We like to keep our brokers informed every step of the way, so your client doesn’t walk.

You can book your free consultation today by simply emailing compliance@nacfb. org.uk with a contact telephone number and a convenient time for our team to call you. For more information visit www.nacfbcompliance.co.uk. Call us on 0203 846 6809 or visit intermediaries.lendinvest.com. LendInvest Limited is registered at 8 Mortimer Street, London, W1T 3JJ (Company 08146929). ICO number ZA179467. Your client’s property may be repossessed if they do not keep up repayments on their mortgage. For intermediaries only.

NACFB | in the news Association news and updates for November 2017

We’ve got you on speed dial.

4 | NACFB Magazine

suite of tailored documents, discounted national workshops, full access to helpdesk consultants and free access for one person to our MyNACFB training and education system for one year.

Getting you finance isn’t the only thing we’re quick to do. We like to keep our brokers informed every step of the way, so your client doesn’t walk.

NACFB NEWS

The Association’s new horizons Graham Toy CEO NACFB

ver the last 25 years, the NACFB has grown considerably in scale and complexity. On top of this, the pace of change has gone through the roof. After about 10 years of trading (ie 15 years ago), the NACFB had less than half the Members it does today and less than half the number of Patrons. That’s some change by anyone’s estimation. If growth was the only consideration, governance wouldn’t be so important, but it’s not. When you take today’s operating environment, ie the challenges associated with regulation, Brexit uncertainty and a general election, the trading landscape is altogether a more complex beast for the NACFB than ever before. In addition, while the business environment we are operating in is far from straightforward, one thing we can be sure of is that further challenges will arise as the NACFB responds to new and ongoing changes in the commercial finance arena. If all this wasn’t enough, the Association is also rapidly establishing its own new compliance services, which is like a business within a business. So what does all this mean? Well, greater complexity plus more risks result in a heightened need for strong, effective governance. The NACFB board has recently taken a look at what best practice says about governance structures and recognised that governance plays an increasingly important role in balancing the needs of an organisation and its stakeholders. Part of the NACFB board’s role is to deliver the Association’s raison d’être, and one thing the board recognised is that it hasn’t been as clear as it could have about our strategy and plans, both in the short and long term.

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Alongside all these business challenges is the internal one presented by an ever-rising bar in respect of the skills and quality expected of board members and leadership of the Association. The list of expected personal and technical qualities of a board director in 2017, for example, is so long and precise that one wonders whether anyone could fit the bill. To put it simply, the board should be a balance of the appropriate skills and experiences required to discharge its responsibilities. However, securing the right people and providing development, support and appropriate infrastructure requires dedication and is an important challenge for the Association. It is also important to look forward and consider what skills, knowledge and experience a board needs to lead and direct the Association towards its vision and business aims over the next five years. The skills of the board must be aligned to robust business plans. Talent management within the board then needs to be linked to the NACFB’s strategy if the board is to be effective. At its January 2017 meeting, led by the NACFB’s chairman, Paul Goodman, with support from interim CEO Rob Lankey, the NACFB board agreed the Association should conduct a review of its governance. They both drew on their experience of not only installing corporate governance across a variety of business structures, but also their understanding of the practical implications arising from implementing changes in governance. What we need to address The Association wants to embed a stricter internal operating environment, so it’s crystal clear who can do what and who can sanction the actions. We need to make sure the right piece of work is on the right desk. In practice, this means the main NACFB board remains the custodians of the Association’s strategy and direction. The NACFB operations board, which meets monthly, deals with the operational matters, supporting the

executive, which in turn looks after the daily running of the Association. The board felt it wasn’t meeting often enough in this fast-moving environment, so instead of four meetings a year, we’re moving to six. it also help a facilitated strategy ‘away day’ to refocus and cement the NACFB’s strategy. Better management information (MI) was required, and to make sure there’s an excellent flow of information we’re introducing more detailed MI, so the board directors and executive know exactly what’s going on. The board wants to explore the broadening of its skills, so at the AGM in November, the Association will be asking Members to vote to allow the NACFB’s board to include independent board members and Patrons’ representatives for the first time. While this might sound a bit radical, it isn’t really. Yes, it’s a first for the Association, but if you look at the format and composition of other trade bodies and similar organisations, most look for a mix of skills relevant to their industry. So we’re going to propose having a board of 12, comprising six NACFB broker board members, two independent board members (these could be valuers, solicitors or other relevant stakeholders in the commercial finance industry) and two members who hold leading roles within our Patron firms. The members will always be the majority, but we sincerely feel that this broadening will extend the insight, knowledge, skill and experience of the NACFB board. At the board’s strategy ‘away day’, we considered this proposal in more depth and honed the details so we can ask for your support at the AGM on 30th November. It’s a big change, so we’re not going to rush it and we’ll take the time to ensure we get the structure right. But you can see, from the direction of travel, that we’re prepared and not afraid to make big decisions to enhance the NACFB for the next quarter of a century. How will the Association be structured? The chart shown opposite sets out how we’re planning to structure the

Association going forward and we’ll be asking our Members to vote for it at the November AGM. Advisory board (AB) This is the main board and it’s proposed to comprise of six broker board members, two co-optee broker board members, two independents and two Patrons. Meets six times per annum. Custodian of strategy and direction. Operations board (OB) Responsible for commercial/ operational activities and comprising of the executive of the NACFB and members of the AB, and has the option to appoint NACFB broker Members for special projects Compliance committee, reporting to the main board (code of practice 1.2.2)

Compliance committee, reporting to the main board (code of practice 1.2.2)

Advisory board (AB)

This is the main board and it’s proposed to comprise of six broker board members, two co-optee broker board members, two independents and two Patrons. Meets six times per annum. Custodian of strategy and direction.

Operations board (OB)

Responsible for commercial/operational activities and comprising of the executive of the NACFB and members of the AB, and has the option to appoint NACFB broker Members for special projects

CEO of the NACFB

Norman Chambers, managing director of the NACFB Roger Deane, managing director of NACFB Compliance Services business Transition to the new NACFB structure The transition from the current structure of the Association to the new will be carried out carefully and gradually. We’re going to ask our Members to support the changes at our AGM in November, but we wanted to talk about them to the industry, now, in an open way. The implementation of the new board structure will take place in the 12 months from the 2017 AGM. Given the Association’s structure has remained largely the same for nearly a quarter of a century, it would not be prudent to rush things; but there’s a lot we are doing now to improve governance and efficiency. For example, we’ve implemented a new document called standing orders – which doesn’t have anything to do with banking by the way. This document is effectively the internal rule book of who is accountable and responsible for what at the Association, and who has the authority to agree things and get them done. We’ve also already implemented better MI, along with a host of other,

Norman Chambers managing director of the NACFB

Roger Deane

managing director of NACFB Compliance Services business

Notes on the structure chart

1) The proposed structure preserves the overall structure of the NACFB, ie an executive, sub-committees, an operations board and a main board, renamed the advisory board. 2) As mentioned above, it recognises the important role independent and Patron board members could play, alongside the broker board members. Patrons are a critical part of the NACFB and always have been. Independent and Patron members bring to the table a vast amount of experience and will strengthen the NACFB board. A not-forprofit trade body such as the NACFB needs to draw on the expertise available to it, as well as reflecting the role it plays when it comes to influencing its stakeholders.

small tweaks to make the business more effective. The lid has also been lifted on the commerciality of both the gala dinner and the Commercial Finance Expo. The net result of all of this is the Association will make a greater profit in 2017 than we first expected and we are proud of that. There is no shame at all in a not-forprofit organisation making a lot of profit. Not-for-profit does not mean don’t make one. We will absolutely make as much profit as possible for reinvestment into what the NACFB

does and provide the essential fuel to get new initiatives off the launch pad. Ahead of the 2017 AGM I call upon our Members and Patrons to please get behind us and support our aims. There is no organisation out there which is better placed than the NACFB to not only represent the commercial finance industry, but also to lead the way in building industry standards. That’s not all: the NACFB is designed around the interests of you, the Members and Patrons.

NACFB Magazine | 7

NACFB NEWS

The Association’s new horizons Graham Toy CEO NACFB

6 | NACFB Magazine

Compliance committee, reporting to the main board (code of practice 1.2.2)

Advisory board (AB)

Operations board (OB)

Responsible for commercial/operational activities and comprising of the executive of the NACFB and members of the AB, and has the option to appoint NACFB broker Members for special projects

CEO of the NACFB

Norman Chambers managing director of the NACFB

Roger Deane

managing director of NACFB Compliance Services business

Notes on the structure chart

NACFB Magazine | 7

NACFB NEWS

Dates for your diary

Notes from our sponsor Karen Bennett Managing director of commercial mortgages Shawbrook Bank

NACFB Barcadia Roadshow - South When: 1st November, 9am–2pm Where: Royal Berkshire Conference Stadium, Reading Birmingham GDPR workshop When: 1st November, 10am–4.30pm Where: National Exhibition Centre, Birmingham NACFB Barcadia Roadshow Midlands When: 2nd November, 9am–2pm Where: Pride Park Stadium, Derby

NACFB to host asset finance day in Bolton NACFB is hosting a dedicated asset finance day, catering specifically towards our asset finance Members. The event will take place at the Bolton Whites Hotel on 16th November, and will be sponsored by NACFB Patrons Shawbrook Asset Finance, Aldermore, Hitachi & Investec. If you are an asset finance broker and are interested in attending, please email andrina.dhillon@nacfb.org.uk.

Bristol GDPR Workshop When: 2nd November, 10am–4.30pm Where: Aztec W, Almondsbury, Bristol Newcastle GDPR Workshop When: 8th November, 10am–4.30pm Where: Crowne Plaza Newcastle, Newcastle Edinburgh GDPR Workshop When: 9th November, 10am–4.30pm Where: Radisson Blu Hotel Edinburgh, Edinburgh Gatwick GDPR Workshop When: 14th November, 10am–4.30pm Where: Hilton London Gatwick, Surrey London GDPR Workshop When: 15th November, 10am–4.30pm Where: Radisson Blue Edwardian Vanderbilt Hotel, London NACFB asset finance day When: 16th November, 10am–3pm Where: Bolton Whites Hotel, Macron Stadium, Bolton LendInvest Broker Academy Course When: 22nd November, 9am–5pm Where: Two Fitzroy Place, London

Limited places left for our gala dinner The 2017 NACFB gala dinner and awards ceremony takes place on 30th November and there are still a very limited number of places available. We are now collecting donations for the silent auction, which will take place during the dinner. All proceeds from the auction will be donated to Young Minds, the UK’s leading charity committed to improving the wellbeing and mental health of children and young people. If you would like to donate a prize, please email andrina.dhillon@nacfb.org.uk.

Member update At the time of going to print, we count a total of : 828 Member firms and 138 Patrons.

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Manchester GDPR Workshop When: 22nd November, 10am–4.30pm Where: Radisson Blu Manchester Airport, Manchester AGM at the Park Plaza When: 30th November, 2pm-4pm Where: Park Plaza Westminster Bridge Gala Dinner & NACFB Awards When: 30th November, 6.30pm - 12pm Where: Park Plaza Westminster Bridge, Commercial Finance Expo 2018 When: 20th June 2018 9.30am-4.30pm Where: 9.30am-4.30pm

With the second round of PRA changes now live, I am hopeful for a period of relative calm within the industry as we all seek to adapt to the muchchanged regulatory environment.

he full impact of the changes remains to be seen, however, several lenders have announced some fairly serious strategic shifts over the past few months. From a Shawbrook perspective, outside of some policy and process adjustments, it continues to be business as usual, with our appetite to lend to the professional investor and landlord community remaining strong. There is speculation as to the ongoing impact. Our thoughts are that the increase in resource necessary to cope with the somewhat onerous underwriting requirements will have an impact on pricing, and that the time to assess an application will increase considerably, compared with the automated online processes most mortgage brokers and customers would be familiar with. In addition, where the portfolio is geared in excess of 75%, some lenders are likely to have some sensitivity around refinance risk. This may result in less funding being made available in order to reduce exposure across the overall portfolio. Lenders may also ask investors to de-leverage the higher loan-to-value

properties, or in some cases, may choose not to lend at all based on the view that the portfolio is not sensibly geared and that they would potentially be lending to a vulnerable investor. The impact may also be felt across those properties that are due to be refinanced within the next 12 months, as lenders will likely check if this is possible. Plus, if the income or loanto-value is tight, there may well be a requirement to de-leverage. There will also be the assumption that portfolio landlords are higher-rate taxpayers and, therefore, any cases that move forward within a lower tax band are likely to require confirmation of investors’ tax positions. The customer will need to provide evidence to demonstrate that they have sufficient income to support their personal living expenses, and may even need to provide proof of all rental payments made over the last 12 months.

three mortgaged properties. This just highlights the need to build strong relationships with specialists of all kinds and it has also never been more important that industry bodies support education to ensure that the market, and in turn customers, are up to speed. As mentioned, I am hopeful for a period of calm as we all seek to adjust to the newer world, but as with all things in this fast-paced environment, the next shift could be just around the corner – so it may pay not to hang about.

It’s also important to note that we may see more institutions pulling out of the portfolio landlord market altogether and focusing purely on the ‘simpler’ customers with one to

NACFB Magazine | 9

NACFB NEWS

Dates for your diary

Notes from our sponsor Karen Bennett Managing director of commercial mortgages Shawbrook Bank

Member update At the time of going to print, we count a total of : 828 Member firms and 138 Patrons.

8 | NACFB Magazine

With the second round of PRA changes now live, I am hopeful for a period of relative calm within the industry as we all seek to adapt to the muchchanged regulatory environment.

It’s also important to note that we may see more institutions pulling out of the portfolio landlord market altogether and focusing purely on the ‘simpler’ customers with one to

NACFB Magazine | 9

Commercial Finance

New packager enters specialist market

The packager Thistle Finance has announced its official launch with the aim of restoring the sector’s “old-fashioned values”. Thistle will offer support to brokers around the UK, particularly in the underserved markets of Scotland and Northern Ireland. Thistle will operate as a whole-of-market broker, with its initial focus including bridging finance, commercial mortgages, development finance and BTL mortgages.

Activity in the UK conveyancing market saw a significant decline in Q2 2017, according to a report from Search Acumen. Stagnant housing supply and restricted home-moving pushed conveyancing levels down 14% to 210,964 from 245,738 in Q1 2017 – the fewest cases in a single quarter since mid-2013. The report also found fewer active conveyancing businesses now compared with four years ago.

Sajid Javid reveals new planning approach Communities secretary Sajid Javid has announced an innovative approach to planning new homes to ensure they’re built where they are most needed. The new approach – first suggested in the government’s housing white paper – will help give a realistic picture of how many homes are needed in each local area.

The alternative business funding provider, ThinCats, has appointed Geoff O’Brien as origination manager for Scotland. Geoff will be leading all new business originations across the region and will be looking to develop local relationships. His previous experience includes director-level positions at Santander and Clydesdale Bank, specialising in business development and supporting the SME market.

HTB appoints two heads to asset finance team Hampshire Trust Bank (HTB) has announced two new appointments to its asset finance team. The specialist bank has hired Michael Godwin as head of operations and Robert Harris as head of wholesale finance. Michael will focus on improving automation and process efficiency, while Robert will help build out the bank’s wholesale finance offering.

Assetz Capital has reported a 175% year-on-year increase in the number of property development projects it has funded in the UK. Its development-focused lending in July reached around 5% of the entire UK banking system’s lending of £537m towards newly constructed buildings. Projects include Trent Pads’ student accommodation block and backing Athena Healthcare.

Foundation Home Loans raises maximum loan size Foundation Home Loans has announced it is increasing its maximum loan size to £1m for loans up to 65% LTV in response to growing demand. The specialist mortgage lender announced the increase is taking place with immediate effect with no change to pricing. For loans up to 75% and for houses in multiple occupation, the maximum loan size remains £500,000.

Connect to enable access to Knowledge Bank

1pm posts 17% increase in profit before tax 1pm PLC has announced a 17% increase in profit before tax for the year ended 31st May 2017. The SME finance provider saw profit before tax and exceptional items grow to £4.3m, while revenue for the year increased by 35% to £16.9m. The group has provided or arranged lending for over 16,150 customers and end-users.

ThinCats hires dedicated origination manager for Scotland

Only 54% of BTL brokers understand the latest PRA changes Just over half of BTL brokers (54%) feel comfortable regarding the new portfolio landlord application rules, according to the latest survey from Kent Reliance. However, 31% were still unsure of their consequences, while 13% didn’t know when the changes were coming into effect and 2% were unaware of them.

Assetz Capital reports 175% increase in development lending

Gateley PLC joins the ASTL Gateley PLC – the legal business of law-led professional services group Gateley – has joined the Association of Short Term Lenders (ASTL) as an associate member. Gateley PLC offers a range of services, including dispute resolution, banking and financial services, corporate, commercial and real estate. Earlier this year, the company reported a 15.7% increase in revenue and 18.8% rise in pre-tax profits.

Conveyancers register fewest transactions since 2013

Clever partners with LendInvest Clever Lending has been appointed as a strategic partner of LendInvest to distribute its specialist bridging and development finance products. Brokers can work directly with the specialist distributor to take advantage of the partnership for cases such as auction purchase, renovation or conversion. Clever Lending provides packaging expertise in first and second charge mortgages, bridging and commercial finance.

Trade bodies back LendInvest Property Development Academy

Three UK industry bodies have announced their public support for the LendInvest Property Development Academy. The Centre for Entrepreneurs, Homes for Scotland and the Home Builders Federation have praised the education course, established in 2016 to help develop the skills of new, small-scale developers. So far, more than 215 applicants have been accepted to attend.

Connect for Intermediaries has formed a partnership with the newly launched criteria searching system Knowledge Bank. Connect will provide access to Knowledge Bank for all of its appointed representatives and other supporting brokers across both its network and packaging arm. Advisers will be able to search more than 18,000 different criteria across more than 43 lenders.

36% of UK adults did not save or invest last quarter Over a third of UK adults (36%) have not saved or invested money in the last three months, according to RateSetter’s quarterly tracker. On average, people saved or invested £232 each month in the last quarter. Twenty-five- to 34-yearolds put away the most over the period (averaging £278 a month), followed by those aged between 35 and 44 (£260 a month).

Brightstar added to L&G’s specialist distributor panel

Brightstar has been appointed to Legal & General Mortgage Club’s specialist distributor panel as a packager. Brightstar’s full range of packaging products will be available to L&G Mortgage Club members with access to the distributor’s lending hub. Brightstar’s Private Label brand will also be available and contains a range of specialist products, including the mortgage tailor, which focuses on bespoke products. Starling to launch business banking Starling Bank has announced it will be expanding its offering into business accounts. The Starling for Business account will initially be designed for entrepreneurs, sole traders and SME owners, offering business finance management from a smartphone. Registration for interested customers is open, with an anticipated live date in early 2018.

Commercial Finance

New packager enters specialist market

Connect to enable access to Knowledge Bank

ThinCats hires dedicated origination manager for Scotland

Assetz Capital reports 175% increase in development lending

Conveyancers register fewest transactions since 2013

Trade bodies back LendInvest Property Development Academy

Brightstar added to L&G’s specialist distributor panel

Top | story Our pick of the latest Patron news

Investec provides PCF Bank with £15m facility Vera Sugar Editor NACFB Magazine

Investec Asset Finance Group has provided a £15m block discounting facility to PCF Bank to help simplify its borrowing structure.

he bank worked with Investec Asset Finance’s wholesale lending team to obtain support for its growth strategy through block discounting. A type of wholesale lending facility, block discounting is best suited for companies looking to release capital tied up in finance agreements to reinvest in their business for growth. “We wanted to work with a partner who understood the goals we needed to achieve and by when,” explained Scott Maybury, CEO of PCF Group. “It was important that the funding structure be kept simple but that it was of sufficient scale to allow us to focus on delivering our growth plans.” Gregg Pietersen, a member of Investec’s wholesale lending team, explained how they were able to support PCF through close collaboration to “get a deep understanding of what they wanted to achieve before presenting a suitable funding solution”. “It was clear from the outset that PCF needed support with a large facility and that speed, flexibility and simplicity were important to them.

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We presented PCF with a £15m block discounting solution that would help the bank to simplify its borrowing structure, which meant they could then focus on their growth objectives.” Established in 1994 and having launched as a fully operational bank in July 2017, PCF now works with over 70,000 customers, offering a range of savings and finance products, including hire purchase and finance lease facilities for vehicle and plant and equipment. Besides block discounting, Investec’s wholesale offering also includes receivables finance, an off-balance-sheet solution for businesses to release capital. “This transaction demonstrates how we are able to provide large, first-time facilities to support our clients,” Gregg added. “It’s our ambition to continue supporting UK businesses by delivering funding solutions that are relevant, and to pair that with excellent understanding of customer requirements to help our customers achieve their ambitions.”

Top | story Our pick of the latest Patron news

Investec provides PCF Bank with £15m facility Vera Sugar Editor NACFB Magazine

Investec Asset Finance Group has provided a £15m block discounting facility to PCF Bank to help simplify its borrowing structure.

12 | NACFB Magazine

Introducing New and refreshed offerings for NACFB brokers on behalf of Patrons and Members

Landbay implements new online portfolio submission platform Paul Clampin Chief lending officer Landbay

pecialist buy-to-let lender Landbay has partnered with property risk software developer eTech to implement its new online portfolio submission platform. Following from the PRA’s recent underwriting changes and building on eTech’s Buy to Let Hub, the lender is developing a simple online proposition which allows brokers to upload all portfolio property details. The platform will also allow them to monitor and manage portfolios, as well as offering streamlined portfolio stress testing and income coverage ratio assessment. In addition, the hub will automate all key criteria variables, sending automatic summary reports to Landbay’s underwriting team and allowing the lender to assess applications quickly. Paul Clampin, chief lending officer at Landbay, said: “Combined with Landbay’s tech-enabled underwriting platform, portfolio landlords and their brokers are now able to use this efficient, straight-through process to secure a loan, while the robust back-end will make this as quick and accurate as possible.“ The partnership with eTech is part of Landbay’s ongoing commitment to being fully prepared for the PRA changes, ensuring that brokers are provided with the smoothest transition into stricter underwriting standards and without disruption to normal business. Mark Blackwell, lending and surveying services director at eTech Solutions,

14 | NACFB Magazine

explained his company aims to make the new regulatory process as easy as possible for brokers, whether that’s through verification of security and portfolio addresses, or allowing data to be instantly uploaded to Landbay’s required template. “Landbay recognises the need to make life easier for the broker,” Mark added. “With the buy-to-let market becoming ever more specialist, we believe the Buy to Let Hub will bring great advantages to both lender and broker. We look forward to working with Landbay at this time when the regulator now has bricks and mortar firmly on its compliance radar.”

Paul added: “Thanks to the support and expertise of eTech, our brokers can expect business as usual in the coming months. “Landbay has always turned to technology to provide the best and most efficient service to brokers, and this partnership is yet another demonstration of that commitment to lead the way in terms of software and security.”

Introducing New and refreshed offerings for NACFB brokers on behalf of Patrons and Members

Landbay implements new online portfolio submission platform Paul Clampin Chief lending officer Landbay

14 | NACFB Magazine

Avenues Case Studies

Type - F

Bromford Road, Hodge Hill

plots 17-20

Completion highlights from a selection of our Patrons and Members

Developer secures 100% funding for Birmingham scheme

ike so many SME developers, our client in Birmingham has the ambition and experience to grow his business. However, he was frustrated with funders chopping and changing terms and his broker was struggling to find flexibility in the market. If your project doesn’t fit the set criteria, there’s no way forward – or so it seemed.

Mark Holden Chairman Go Develop

The

(plots 17 & 19 handed)

Bedroom 3 Kitchen / Dining Master Bedroom

Landing

Avenues

One of our Bromford Road, HodgeLiving Hill Room experienced developer clients, Thankfully, help was at hand. At this year’s NACFB Expo, our broker came WC based in the across Go Develop’s unique, 100% land and build funding that doesn’t require Midlands, a penny in17-20 from the developer. Typesaid: - F “The plots (plotsAfter 17 & 19 handed) some further discussion with Lynsey delivery of a quality Porter, our business development director, the broker found no set product on time and spreadsheets or ‘computer says’ mentality. Being a principal funder, Ground Floor under budget are investing our own money nationwide, Living Room our broker understood that Go 4.98m x 2.53m (16ˊ04˝ x 8ˊ03˝) the main measures Develop could be flexible for the Kitchen/Dining right opportunities and make things 4.85m x 3.41m (15ˊ11˝ x 11ˊ02˝) of success in any happen, fast. Bedroom 3 WC / Dining 2.05m x 0.88m (6ˊ09˝ x 2ˊ11˝) development project.” Kitchen Our broker simply provided a

development appraisal, including plans, ensured the project was between the target GDV of £2m-£15m and, in exchange, received full funding covering land, build, stamp duty and soft costs.

Master Bedroom

Bedroom 2 Bathroom

First Floor Master Bedroom 4.89m x 2.70m* (16ˊ00˝ x 8ˊ10˝*) Bedroom 2 3.50m x 2.76m

(11ˊ06˝ x 9ˊ01˝)

Bedroom 3 3.01m x 2.22m

(9ˊ10˝ x 7ˊ03˝)

Bathroom 2.12m x 1.99m

(7ˊ00˝ x 6ˊ06˝)

developer keeping the lion’s share of the profits, allowing them to expand their operation over multiple sites.

Our developer Currently, the development is ahead Landing was delighted of schedule, with site set-up works completed and excavation and * Maximum measurement has been used. NB: All dimensions are guide and may vary from plot to plot that please check with sales advisor. Go Develop In this case, funding of nearly £3.36m foundation works commencing. was provided to replace a dilapidated In a year’s time, there should be a would do All enquiries contact the selling agents:0121 749 7888 pub with 21 new homes and four supercharged profit for the developer the admin, apartments close to the University of partner. As always, Go Develop also Birmingham. Planning permission rewards relationships with their Living Room VAT returns, has been granted, and the project brokers and introducers, offering high 2-4 Hurst Lane, Castle Bromwich, Birmingham, West Midlands, B34 7HR should take around 13 months. procurement fees. Bedroom 2 valuations and E: castlebromwich@burchelledwards.co.uk Bathroom A new Go Develop SPV was set up Our developer was delighted that Go chasing of the same day to hold the project until Develop would be the one to do the it’s finished and sold, with a profit admin, VAT returns, valuations and solicitors Please note: and plans show a typical house type. The house type may be built in a range of elevational finishes using a variety of materials. Floor plansofand share contract for bothIllustration parties. On chasing solicitors and surveyors positions may vary from plot to plot. This is because we operate a policy of continuous improvement and we work within the needs – of he thenow Planning completion and sale ofwindow the property, has his Sunday evenings Authorities. Please ask your Sales Adviser for precise details of the finish and specifications of your chosen home. the profit is divided, usually with the back. He said: “Go Develop offer a

Ground Floor 16 | NACFB Magazine

Living Room 4.98m x 2.53m

one-stop, property development funding solution, with a straighttalking, joint venture partnership. The team is great to deal with and simply ‘gets’ new build.” Like 92% of Go Develop partners, our Midlands developer has returned with three further projects. These include two based in West Bromwich and the Jewellery Quarter which, together, will result in the development of over 160 flats. Our developer partner added: “I work only with the best people in order to deliver an exceptional project every time.” Go Develop currently has over 1,000 units under construction and plan to reach £250m partner funding in the next 18 months.

First Floor

(16ˊ04˝ x 8ˊ03˝)

Master Bedroom harkerhomes 4.89m x 2.70m* (16ˊ00˝ x

8ˊ10˝*)

www.harkerhomes.co.uk

NACFB Magazine | 17

Avenues Case Studies

Type - F

Bromford Road, Hodge Hill

plots 17-20

Completion highlights from a selection of our Patrons and Members

Developer secures 100% funding for Birmingham scheme

Mark Holden Chairman Go Develop

The

(plots 17 & 19 handed)

Bedroom 3 Kitchen / Dining Master Bedroom

Landing

Avenues

development appraisal, including plans, ensured the project was between the target GDV of £2m-£15m and, in exchange, received full funding covering land, build, stamp duty and soft costs.

Master Bedroom

Bedroom 2 Bathroom

First Floor Master Bedroom 4.89m x 2.70m* (16ˊ00˝ x 8ˊ10˝*) Bedroom 2 3.50m x 2.76m

(11ˊ06˝ x 9ˊ01˝)

Bedroom 3 3.01m x 2.22m

(9ˊ10˝ x 7ˊ03˝)

Bathroom 2.12m x 1.99m

(7ˊ00˝ x 6ˊ06˝)

developer keeping the lion’s share of the profits, allowing them to expand their operation over multiple sites.

Ground Floor 16 | NACFB Magazine

Living Room 4.98m x 2.53m

First Floor

(16ˊ04˝ x 8ˊ03˝)

Master Bedroom harkerhomes 4.89m x 2.70m* (16ˊ00˝ x

8ˊ10˝*)

www.harkerhomes.co.uk

NACFB Magazine | 17

CASE STUDIES

Tracker BTL loan enables expat portfolio growth John Goodall CEO & co-founder Landbay

s an innovative P2P lender, Landbay knows that landlords, investors and brokers prize high returns and low costs above all else. Recently, we were approached by a broker for buy-to-let finance for an expat who had been living abroad for 10 years. She was looking to buy her second buy-to-let property: a one-bed flat on the 10th floor of a 14-storey converted office building in Croydon. This case was already complex by virtue of the property being on the 10th floor and the client, being an expat, was paid local currency. This limited the finance options available. A further complication was that the landlord had already exchanged contracts on 22nd December, and the hard completion date was less than a month later, on 20th January. If the finance wasn’t secured, the landlord would lose not only the property, but her deposit as well. This would be quite the dampener on the Christmas season, so we were determined to help.

For landlords like this, our expat tracker product is the perfect solution. We’ve automated our processes and tailored the programme specifically to expats, including the ability to secure a loan using six months’ worth of bank statements and six months of payslips in the country of origin. The property was valued at £287,000, and the loan required was £200,900 at an LTV of 70%. The customer wanted a 10-year interest-only term product, and our expat tracker could offer Libor +4% with a 2% lender arrangement fee. Despite the Christmas period and the constraints this placed on our availability, the mortgage was processed in just nine days. The completion, in total, took 19 working days, with the offer in principle being received in one working day and the legal work taking five working days, lengthened by solicitors’ offices being closed over Christmas. While this case is exemplary, it’s not unusual. Supported by its dedicated intermediary website, Landbay is typically able to issue an offer in principle within 48 hours. The website provides brokers with a secure and intuitive platform to help them source mortgages on behalf of their buy-tolet clients and apply online. It also includes full applicant, property and

Case snapshot Property value: £287,000

Business-boosting loans up to £500,000 Fixed rate loans with no set up fees or early repayment charges

Loan amount: £200,900 LTV: 70% Rate: Tracker - 4.00% + LIBOR Term: 10 years interest only

Security may be required. Product fees may apply. Over 18s only. Business turnover of up to £2 million. Excludes refinance and Commercial Real Estate Finance.

Borrower: Individual Lender arrangement fee: 2% (£3,939.22) Mortgage payment: £718.22 pcm

borrower criteria, along with a detailed guide on how to apply, ensuring the process is quick, easy and secure. The property portfolio key is another feature that allows our brokers to enter a detailed analysis of a landlord’s full portfolio in line with September’s PRA portfolio landlord changes. Affordability ICR and stress tests are all already built into our tech-enabled underwriting platform, so portfolio landlords, and their brokers, will be able to use the same straightforward process to secure a loan as before.

Email us at brokerteam@natwest.com ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT. 18 | NACFB Magazine

CASE STUDIES

Tracker BTL loan enables expat portfolio growth John Goodall CEO & co-founder Landbay

Case snapshot Property value: £287,000

Business-boosting loans up to £500,000 Fixed rate loans with no set up fees or early repayment charges

Loan amount: £200,900 LTV: 70% Rate: Tracker - 4.00% + LIBOR Term: 10 years interest only

Security may be required. Product fees may apply. Over 18s only. Business turnover of up to £2 million. Excludes refinance and Commercial Real Estate Finance.

Borrower: Individual Lender arrangement fee: 2% (£3,939.22) Mortgage payment: £718.22 pcm

CASE STUDIES

Asset finance boost for major festival stage I’ve been working in the credit and finance industry since the early ‘80s – when Glastonbury was just about the only globally known UK music festival – and this is one case study that I just had to share with the NACFB. Paul Burke Managing director Davenham Asset Finance

20 | NACFB Magazine

t was a very cold and frosty morning as I approached the client’s warehouse. It had obviously been around for a while and was surrounded by steel trusses of all types and sizes, with large steel stillages full of various brackets and stands. “This is going to be an interesting credit,” I thought to myself, as Jim, my asset logistics specialist, approached me. He had suggested that I contacted this company as he’d dealt with all their transport/ logistic requirements for many years, and knew the assets very well. I was lead into a small office and was introduced to Liz, one of the directors. From the moment I met her, I could see she had a desire and enthusiasm for what she, her business partner and the company did. They were seasoned pros and had been involved in the staging and event management industry for over 50 years collectively. They had worked on many high-profile events, tours and concerts, including

Michael Jackson, the Rolling Stones, Madonna and the Eagles, among other big names. They also worked on major ceremonies, including the Melbourne Commonwealth Games, the Salt Lake City Winter Olympics, the London 2012 Olympic Games and the 2014 Invictus Games. Even our local Manchester Commonwealth Games. A black book to die for. So why had this established, successful company with a very experienced management team turned to Davenham Asset Finance? In short, it’s because they’d been informed of our reputation of investing time and resource to understand the companies and the assets we fund, as well as listening to and working with the directors. In this case, Liz had won the contract to co-ordinate a new, bespoke stage at one of the UK’s biggest music festivals and needed the funds to build something revolutionary. The high street banks didn’t want to get their hands (or wellington

boots) dirty, and didn’t even look at the business or its security. On the face of it, Davenham was asked to raise finance on staging, but this was no ordinary staging: these were world-leading structures sought after by the top production companies. We took the time to learn about the staging, their connected assets and the related engineering requirements, and could see that our client’s designs had incorporated load-bearing capabilities and other options – meaning they were far superior to alternatives on the market. What was key for Davenham was to assess the value of the various stages and their components, and understand that many of the client’s previous stages had been built specifically for annual events. This meant an ongoing contractual commitment to hire, highlighting future committed cash flows. We also needed to understand the flexibility of the equipment as it had all been

designed as modular, to be used in a number of ways to create different structures, similar to a Meccano kit. Detailed discussions and research conducted by Davenham’s valuers confirmed there was material value in the staging and that there would be demand in the market if it ever needed to be sold. A full understanding of the complex erection processes then had to be confirmed, and we achieved this through access to the detailed engineering drawings and the on-the-ground practical experience of our specialist. Jim had seen the client’s previous staging being erected and taken down on numerous occasions and, therefore, had detailed, hands-on knowledge. Davenham now knew it had an asset with significant value, access to the engineering drawings (which in themselves represented a significant piece of intellectual property), and a company and management team we believed in. We collectively discussed the risks they were taking and how

they would plan for any exit should the need arise and, as a result, the perfect security package was brought together through careful structuring and legal documentation through a bespoke refinance package. Our client, Liz, said: “It has been absolutely refreshing to work with an alternative finance provider who literally rolled their sleeves up and took the time to understand our business. Asset finance has proven to be extremely successful for our staging and temporary structure business, and we are now continuing to work with Paul and his team on the growth of our company.” Over the years, myself and my team have worked hard to establish the Davenham brand. As a result, we are now strongly associated with a personalised approach to supporting our brokers and clients as part of tailored asset finance solutions, both for everyday assets and those out of the ordinary.

NACFB Magazine | 21

CASE STUDIES

20 | NACFB Magazine

NACFB Magazine | 21

CASE STUDIES

Overcoming legal challenges for £26m landmark project Zorin Finance proudly assisted with the purchase, conversion and extension of an existing eight-storey office building in New Malden to provide 93 residential flats, including 11 shared ownership units.

CASE STUDIES

ision Homes is a design- and customer-led development company which was started by Parma Sulh in 2001. His idea was to specialize in developing small, residential new builds, mews houses and gated developments for modern, urban living – in line with the kind of schemes Zorin likes to get involved with.

over the past few years by Matterhorn New Malden Ltd, in conjunction with their masterplan architect, Assael Architecture.

The £26m loan to developer Vision Homes will fund the construction of this modern development scheme in South West London under the jurisdiction of the Royal Borough

Another challenge we faced was a complicated Section 106 agreement, relating to a license for car parking spaces on an adjacent site owned by the vendor. The associated

The key technical risk associated with the scheme was the structural condition of the existing building, and its ability to accommodate additional floors and the proposed balconies.

the ground floor is likely to be occupied during construction.

orin’s loan origination and credit risk team played an active role from beginning to end by meeting the developer initially and getting to know the site in great detail. The planned exit route would be for the private units to be sold on the open market, with the remaining affordable units to be purchased by a housing association. This was an exceptionally difficult deal with a lot of legal encounters – however, the entire lending process took only six weeks to complete, despite all the challenges, and Zorin was able to provide a loan of over £26m on a 22-month term. The development now has the potential to be a landmark scheme in New Malden as the price point of the majority of the private flats is within the Help to Buy scheme band, which will attract local buyers. Parma Sulh, CEO of Vision Homes, said: “Zorin Finance offered us an attractive borrowing proposition, based on their expert knowledge of the property sector, flexibility, transparency and ability to move swiftly. It is clear to us that alternative lenders such as Zorin offer a crucial way for housebuilders to realize their developments under challenging market conditions and deliver important new homes for Britain.” Zorin was founded in 2011 by entrepreneur Luke Townsend as a response to the lack of development finance being made available by established high street banks, and a perceived deterioration in the service levels they were providing.

of Kingston upon Thames. The conversion work encompasses basement, ground floor, main entrance core and escape stair areas. The building that Vision Homes intends to carry out the office-toresidential conversion on has not been fully occupied for the past seven years. The proposals for the scheme have been progressed

22 | NACFB Magazine

lawyers, Memery Crystal, altered this agreement in conjunction with the developer, the seller and Kingston Borough Council in order to make the development fundable. There was also the technical risk associated with the logistics of managing the construction works with tenants in occupation. However, the developer advised that only

Zorin is supporting the delivery of new homes in the UK which otherwise would not be built without new, alternative sources of financing for SME housebuilders, given the lack of appetite to lend by mainstream banks in the residential development market.

Katy Katani Associate director Zorin Finance

NACFB Magazine | 23

CASE STUDIES

over the past few years by Matterhorn New Malden Ltd, in conjunction with their masterplan architect, Assael Architecture.

The £26m loan to developer Vision Homes will fund the construction of this modern development scheme in South West London under the jurisdiction of the Royal Borough

Another challenge we faced was a complicated Section 106 agreement, relating to a license for car parking spaces on an adjacent site owned by the vendor. The associated

The key technical risk associated with the scheme was the structural condition of the existing building, and its ability to accommodate additional floors and the proposed balconies.

the ground floor is likely to be occupied during construction.

22 | NACFB Magazine

Katy Katani Associate director Zorin Finance

NACFB Magazine | 23

Cover Story | feature

Commercial temperatures rise The speedy recovery of the UK property market since the referendum By Beth Fisher, editor, Bridging & Commercial

Cover Story | feature

Commercial temperatures rise The speedy recovery of the UK property market since the referendum By Beth Fisher, editor, Bridging & Commercial

COVER STORY

In the City, Asian investors continued to be the most prominent, making up 50% of turnover in H1 2017, with an average deal size of £147.39m. European and UK investors were responsible for 25% and 16% respectively, while US and Middle Eastern investment was at just 4% each.

Last year’s EU referendum verdict cast a shadow over the UK’s commercial property market. Investor confidence waned, resulting in a number of property funds temporarily suspending trading amid an outflow of funding. Almost 18 months and a snap election later, the shadow finally seems to be fading.

On the other hand, William believed that activity between domestic and overseas investors was currently split fairly evenly. “One of the interesting aspects postreferendum is that while overall investment slowed during Q3/Q4 2016, the share from overseas buyers increased.” Jon Salisbury, managing director at Ortus Secured Finance, said the lender had continued to receive lots of requests for finance from UK and overseas investors. “The key motivation behind most transactions continues to be dealspecific opportunities or upside, as opposed to investors taking views on the economic landscape.”

he volume of investment in the UK commercial market for the first half of 2017 stood at a colossal £27.2bn, 1% higher than the same period in 2016, according to Savills. UK offices attracted 39% of the total investment. In the same period, commercial property investment in the City of London reached £4.98bn – a 17% increase on H1 2016. This could be attributed to the strong demand for ‘trophy assets’, with 64 deals transacted in the first six months of the year, at an average lot size of £77.8m. Savills claimed it was almost certain that the 2017 total turnover would surpass that of 2016. William Matthews, partner at Knight Frank, explained: “[There] was a clear slowdown in activity directly after the referendum and, broadly speaking, there was 25bps outward movement in yield across most main sectors, equating to a roughly 5% fall in values.. “Open-ended real estate funds were particularly badly hit – they saw significant outflows of investor funds in the wake of the EU referendum, causing some to need to sell assets to meet redemptions.

26 | NACFB Magazine

“However, by the end of Q3, most fund redemptions had slowed, and values in the market were beginning to stabilise as investment activity picked up again (helped by the decline in the value of sterling). “2017 has been much stronger: the scale of investment seen in the first half of 2017 was beaten only by that recorded in 2007 and 2015, and 2017 looks on track to beat last year in terms of overall volume.” Ludo Mackenzie, head of commercial at Octopus Property, agreed that appetite had seen a recovery since the referendum: “Investment volumes suffered in the months immediately before and after the referendum, but have bounced back since last autumn.

“There’s a real variety of domestic and international investors at present, all the more so as a result of the weaker pound.” Of overseas investors, American institutions have become particularly active, Marcus explained, possibly due to US investors seeing the UK as a safe bet at a time of global political and economic uncertainty. “As has been the case for a number of years now, a lot of the inflows into UK commercial property are coming from the Far East, but really there are investors from all around the world.”

“Smaller investors in the sub-institutional market appear to be unperturbed, judging by the sales volumes and success rates in the auction rooms.”

Mat Oakley, director of European commercial research at Savills, believed that non-domestic investors were the most active buyers in the UK commercial property market this year, and, within that group, the most active buyers had been from Asia Pacific, the US and mainland Europe.

Who is investing? Marcus Higgins, director of property consultancy and surveyors, Naismiths, said the question really should be who wasn’t investing in UK commercial property.

“Private investors from Hong Kong and the Middle East have been the most active new entrants since the EU referendum, with the weakening of sterling definitely playing a part in this,” Mat added.

UK hotspots The central London market has completed a number of very large office transactions this year, including the acquisition of the Leadenhall Building (known as the Cheesegrater) for £1.15bn, 2 and 3 Bankside for £310m and the sale of 67 Lombard Street for £129.3m. “The office sector is the most heavily traded area of the market and the value of transactions is heavily skewed to central London,” said Ludo. “However, if trophy hunters from overseas are excluded, [investors are] more interested in the outer London zones and the regions where there is perceived greater value for money.” William said this had prompted other London property owners to consider bringing forward buildings for sale. “In the longer term, we see scope for greater investor interest in the UK’s key regional office markets, where much regeneration is happening, and from an occupier perspective, there remains a shortage of good quality, modern stock.” Darrell Walker, head of sales - second charge and commercial at OneSavings Bank, added that the bank regularly saw ‘micro pockets’ pop up across

the UK – however, these were driven more by the type of property in question than the location.

There are two schools of thought: the first is that the market is in bubble territory; the second is you cannot afford not to be exposed

“Good transport links are often a common driver in this sector,” he added. Marcus stated that almost every major city outside London was a hotspot, with Bristol, Birmingham and Manchester at the front of the peloton. “There’s still a considerable amount of activity in London, clearly, but in relative terms, it’s the cities outside the M25 that have seen the greatest levels of activity over the past year or so. “I’d expect this trend to continue in the short to medium term.” What is driving demand? Mat explained that the strongest demand was for prime assets with long-term leases and secure income streams. “This favours London offices and those in the key regional cities, as well as logistics in the Midlands and around the M25. “This is a reflection of a global hunt for income security, and the comparatively safe income that the UK commercial lease offers.” Mat believes that this has also caused a surge in investor interest in alternative sectors such as pubs, the private rented sector and student housing. According to Savills, 68,000 student beds traded in 2016 totalling £4.5bn, however, it expected this to rise to 75,000 beds trading for £5.3bn in 2017 – a rise of 17% year-on-year. “Student accommodation remains the flavour of the day for many commercial property investors, with schemes cropping up in countless university towns and cities, from Glasgow and Durham to Leicester and Birmingham,” Marcus added. Permitted development rights (PDR) are also driving the office-toresi market, Marcus claimed, with a percentage of these projects ending up as student accommodation. “If there’s a fly in the ointment with PDRs, it’s that a growing number of investors are seeking to enhance their developments, which can mean a lot more time and red tape as the necessary planning permission is sought.

NACFB Magazine | 27

COVER STORY

26 | NACFB Magazine

“Smaller investors in the sub-institutional market appear to be unperturbed, judging by the sales volumes and success rates in the auction rooms.”

Who is investing? Marcus Higgins, director of property consultancy and surveyors, Naismiths, said the question really should be who wasn’t investing in UK commercial property.

“Private investors from Hong Kong and the Middle East have been the most active new entrants since the EU referendum, with the weakening of sterling definitely playing a part in this,” Mat added.

the UK – however, these were driven more by the type of property in question than the location.

There are two schools of thought: the first is that the market is in bubble territory; the second is you cannot afford not to be exposed

NACFB Magazine | 27

COVER STORY

“It just makes the deliverability of projects that little bit harder.”

due to changing consumer behaviour and the rise of internet shopping.

Marcus explained that the surveyor was also seeing a lot of transactional bank customers taking out loans and building their own premises, rather than renting them.

“…The growth of online retailers has led to a requirement for more warehousing space in some areas and perhaps an over-supply of retail space in other areas,” said Emma Cox, sales director of commercial mortgages at Shawbrook.

“One reason for this is that there’s simply not enough suitable property available to rent; the other is that it can be far cheaper to develop a purposebuilt property via a commercial mortgage than rent longer term.

“Where retail usage has fallen there are many examples of changes of use to restaurants or cafes, for example, rather than a property becoming vacant.”

schemes that offer a consumer experience) and secondary retail which looks increasingly obsolete,” Ludo explained. “The other end of this seesaw is the logistics sector, which has seen incredible rental growth. “Investors are looking to lock into this structural shift and are paying yields that require rents to keep growing.

“The businesses doing this aren’t office-based companies but light industrial firms that need warehousing, storage and manufacturing space.”

According to Cushman & Wakefield’s ‘UK Shopping Centres: Dead or Alive?’ report, more retailers are looking for larger units in prime positions to serve as flagship stores.

“Much like the internet giants (Amazon, Facebook, Alphabet, etc), there are two schools of thought: the first is that the market is overpriced and in bubble territory; the second is that you cannot afford not to be exposed and that you should buy in at all costs.”

The part of the commercial market most under threat appears to be retail,

“There is an increasing polarisation between the best retail (dominant

The commercial market in 2018 “For as long as the yield gap remains as

28 | NACFB Magazine

Marcus concluded that Brexit did not have the impact some thought it would and had resulted in more transactions as sterling weakness attracted overseas investors.

Brian Rubins, director at Alternative Bridging Corporation Limited, said that the property industry and those who financed it continually reacted to change.

“All told, Brexit has resulted in upward, rather than downward pressure on prices at this current moment in time.

“Not to do so, they would disappear in a cloud of dust. However, Brexit is different – it is the long, lingering death by a thousand cuts. “The effect on property finance? Our forecast - nothing good. But property finance is a big subject involving huge numbers and it is diverse; home loans, commercial investments, business premises, and development. All have different dynamics but one thing has been common to all – a flight to quality and a reduction in activity. “Going forward, we are where we are and nothing is likely to improve until Brexit is behind us.

“Saying that, I expect the market to continue to grow, especially outside of the capital as that’s where investors see more value and growth.

Retail Investment Volumes (£ billions) Source JLL 14 12 10 8 6 4 2 0

“If it is deemed to be a ‘good Brexit’, markets will recover as they always have but, if not, values will slide and lenders will be even more selective than they are now.”

of next year. In that regard, to make a prediction [for 2018] is almost foolhardy.

“What’s important is that the market grows steadily and does not overheat.”

“There’s a lot going on in the world at present and things are changing almost by the day. In the UK alone, we could have a new prime minister by the spring

Volume (£ bns)

The part of the commercial market most under threat appears to be retail, due to changing consumer behaviour

wide as it is, and barring a geopolitical shock to the system, it is hard to see commercial property values moving materially in either direction,” Ludo added.

2012

2013

High Street

2014

2015

Retail Warehousing Park Supermarkets

2016

H12017

Shopping Centre

Mixed Portfolios

NACFB Magazine | 29