IN THIS ISSUE
THE FORMALITIES
!"
FOREWORD A letter from our Founder, Matt Siddell
DEVELOPMENT & CONSTRUCTION
!# TIME TO BUCKLE UP AND BE BOLD By Andrew McDonald
HERITAGE
$! A VILLAGE WITHIN A VILLAGE By Emma Morby Cover featuring Peter Huf, tells us about the history of the revolutionary company, his personal journey so far and the lessons he’s learnt along the way on p. 30.
ISSUE NO. 16
Chief Architect of Huf Haus, BATROOMS
$" BRIGADE COURT: A 300 BATHROOMS PROJECT By Joe Mühl
INTERIORS
$% 5 TIPS FOR WORKING FROM HOME IN A SMALL SPACE By David Ives
PLANNING
'' GARAGE MUSIC: PLANNING & REDEVELOPING LOCK-UP GARAGES By David Kemp
COVER
(! SUSTAINABILITY IS THE WAY FORWARD Q&A with Peter Huf
MORTGAGES
"# SEMI-COMMERCIAL MORTGAGES By Lee Langley
CROWDFUNDING
&! THE FINANCE MARKET POST PANDEMIC By Michael Bristow PROPERTY FINANCE
"! SPECIALIST LENDERS ARE OFFERING HIGHER GEARINGS By Paul Watson
"" STRESS TESTING: HOW TO MAXIMISE YOUR PROFITS By Paul Oberschneider
FOREWORD _______________________________ Qandor Founder Matt Siddell Partner, Head of Content & Marketing George Le Roux Partner, Head of Membership Simon Podd Events & Publishing Manager Tess Lawson Photographer/Videographer James Evans Membership Manager Jordan Brown _______________________________ For editorial and advertising enquiries, please email: magazine@qandor.org Visit our website www.qandor.org Contributors Andrew McDonald David Kemp David Ives Emma Morby Joe Mühl Lee Langley Mike Bristow Paul Oberschneider Paul Watson Peter Huf _______________________________ Legal Qandor Ltd does not endorse any of the members or contributors to this publication. Always seek your own independent advice prior to investing or agreeing terms of business.
_______________________________ 004 – Qandor – Issue No. 16
Once again, some excellent articles in this month’s magazine. It’s our pleasure to invite Peter Huf to participate in our cover feature. As pioneers of modular construction, Huf Haus has been leading the way in modern methods of construction and working with sustainable materials. Peter shares his passionate views on this topic on page 30. Something that hasn’t been dampened by the pandemic is the entrepreneur’s appetite to spot opportunities and earn a profit as life adapts to a “new normal”. In Andrew MacDonald’s piece ‘Time to Buckle Up & Be Bold’ on page 6, he dares us to innovate, identify new strategies and be bold - but not recklessly so! August is always an opportunity to take time out, relax and draw breath. Coming after months of restrictions on live events, it feels like this year September is providing a much-needed opportunity to gather in person once again – a fresh start! With this in mind, we have announced a full schedule, more than four months of events, including the chance to meet up for a splendid lunch at Oxo Tower Brasserie on Thursday 16th September, taking in the views on what is historically one of the last warm days of the year where I hope to see many of you. (qandor.org/events) Lastly, to turn the focus back to you, our members, we’d like to shine a light on those that have collaborated over the last 12 months. Please reach out to us if you would like us to feature any collaborations with fellow Qandor members. In the meantime, I hope to see you in person or online at one of the many events planned to kickstart this fresh start.
M! Sidd" Matt Siddell Founder
OPEN TO ALL
MEMBERS
SUMMER LUNCH OXO TOWER BRASSERIE BARGE HOUSE ST, LONDON SE1 9PH
DEVELOPMENT & CONSTRUCTION
TIME TO BUCKLE UP AND BE BOLD ANDREW MCDONALD Co-Founder Credo Living www.credoliving.co.uk
Unprecedented is a word much overused in the current climate, albeit for obvious reasons. Throughout my 26-year career in a property agency, I’ve encountered three ‘unprecedented’ markets, so perhaps there are precedents for today’s unprecedented situation? The two other seismic activities which lead to the previous unprecedented markets date back to the Credit Crunch of 2008 and the Brexit vote of 2016. The years following on from the Credit Crunch were truly awful for an agent: the cogs of the industry ground 006 – Qandor – Issue No. 16
to a halt and the commercial market fell foul of the economic carnage that followed. That said, there was no ‘new norm’ after the grey clouds lifted and blue skies returned a few years down the track. The same could be said of the mess immediately after the Brexit referendum. Thankfully, the return to the ‘old norm’ was quicker post-Brexit and within a year it would be fair to say we had returned to sunny uplands within the commercial property market. There was, though, a noticeable shift in sentiment away from the retail sector as a shaky economic position compounded nerves surrounding physical retail in light of ever-maturing
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“With the level of disruption currently being witnessed, this is a time to try new things and be bold.” online sales. As we slowly inch our way out of the COVID mess, this time around I’m not anticipating a return to the ‘old norm’. There will be a new norm, and the exciting part is wondering what that will look like. The current market is an entrepreneur’s playground, and fortunes will be made (and lost) as investors bet on new sectors to roar out of the traps and which ones have settled into the departure lounge. If you look at it this way (and forgive the broad generalisation), a typical pension fund will have a mixture of property assets but centred around the office, retail (including leisure) and industrial sectors. There is exposure to ‘alternative’ sectors (such as car showrooms) but otherwise they follow a fairly
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familiar theme but with different quality of assets on a fund-by-fund basis dependent on many things, including the income returns they offer their investors. The ‘norm’ post-COVID is going very much to depend on how society functions after we reopen. It’s very difficult to see a large migration back towards physical retail for many years yet from sophisticated or defensive property investors. Numerous things will have to happen before pension funds get comfortable in this sector in a meaningful way. There will be vulture funds and those betting on a ‘recovery play’, but not enough to fill the gap delivered by the hasty retreat beat by the pension funds. It’s difficult to be accurate with retail investment property pricing, but I’ve seen quality assets easily halve in price over the last 18 months. Some secondary and tertiary assets have tumbled past this and seemingly remain in freefall. For the brave, yields in this sector of the retail market may look alluring at considerably over 10%. But this reflects a genuine risk and limited debt appetite for such product. The cash-buying funds typically tend to steer clear of these types of asset as they are switched off against excessive risk with income preservation arguably their prime consideration. So, if we can write off retail, then where next? Well, let’s take a look at offices. You tell me what the working situation is going to be like in 12 months, 24 months, 5 years? Will we have short memories and pile back into our cubicles en masse on instruction of company bosses? Have Zoom and Microsoft teams fundamentally shifted our working
patterns with the new generation of leaders coming through recognising the benefits of flexible working? Or will the truth be a hybrid version somewhere in between? The smart money seems to be on the hybrid situation, so what does this mean for city centre office stock with scaled down occupational demand? Central London is largely protected by significant global capital pointing this way. The same cannot be said of the other major cities. The future of large city centre offices is uncertain and it’s a brave shout for a fund manager to bet on a recovery while the situation unfolds. The industrial sector of the property market is flying and, for the meantime, shows no sign of slowing down, partly driven by lack of alternatives and partly driven by a continued rise in rents born of strong occupational demand. Which other sector could you say this is true for? The weight of money aimed at industrial is staggering, and deep down I do wonder whether a bubble is being created by frustrated investors
hamstrung by a lack of credible alternatives. With the level of disruption currently being witnessed, this is a time to try new things and be bold. But be educated and bold. I hear some truly ‘alternative’ property asset classes are now on the radar and, while this currently would only account for a small fraction of deals, funds have dipped their toes into the likes of forestry land, orchards and, I learn, even cemeteries! Buckle up and enjoy the ride over the next few years. It’s not going to be for the faint-hearted! Q.
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HERITAGE PROPERTY
A VILLAGE WITHIN A VILLAGE EMMA MORBY Director of Land Acquisition Heritage England www.heritageengland.co.uk
The property is situated in the heart of the hugely popular fishing village of Appledore, sat on the banks of the River Torridge. The village of Appledore sits on the opposite side of the river to the village of Instow and is connected via a seasonal ferry service. Instow benefits from a further range of amenities, including various pubs and restaurants and the North Devon Yacht Club. 010 – Qandor – Issue No. 16
You’d be forgiven if from first impressions you thought you had stumbled onto a small Spanish village. The Grade II listed property is set within a Mediterraneanstyle courtyard and has in excess 6,000 sq. ft. of accommodation, which boasts a 5-bedroom house, 3 additional cottages (1 x 2-bed and 2 x 1-bed), 3 further apartments and a shop which is currently let. At the end of the courtyard, an archway leads to the garden of the property, which is divided into two sections: one for the
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potential holidaymakers, and one for the owners. The gardens are enclosed by a beautiful walled garden and benefit capturing the sun all day long. There is also a fully equipped studio at the end of the garden for entertaining or perhaps a home office. This property is perfect for multigeneration living, for holiday lets (which
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create a steady income) or just to create your own private community! What makes this property unique is how it has been designed: behind a closed door, off the street is a secret “Narnia” world! The property has been restored to the highest standards, keeping some of the original historic features along the way. This property recently sold for just over £1,500,000 which appears almost too good to be true considering the amount of property you are getting. Q.
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BATHROOMS
BRIGADE COURT, A 300 BATHROOMS PROJECT JOE MÜHL Managing Director - Contracts & Commercial Projects Ocean Bathrooms www.oceanbathrooms.com
This beautiful building lent itself to modern and luxury living. It boasts its own restaurant, gym and other amenities. Transforming the original home of the London Fire Brigade in its lucrative zone 1 location with views of the Shard, five minutes from Borough station, it has been a privilege to work on and visit the build whilst it has 014 – Qandor – Issue No. 16
gone up and see the marketing suite. After securing the project at the end of 2020, Ocean Bathrooms have been working closely with the client, contractors and Hansgrohe to ensure the 300 bathrooms (199 luxury apartments) achieve the high-spec finish and ambiance that were specified for this ambitious development. Each apartment has been tastefully finished to a high specification with a nod to
its traditional use with matte black bathroom finishes and chevron wall tiles, thus creating a seamless look from the modern to traditional. Each shower room features a walk-in shower with black framed panel, wet room floor, Hansgrohe Raindance with push select shower valve, and concrete tile effect floor. Ocean Bathrooms also were asked to supply a variety of bespoke products
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and luxury finishing to match the themed products. Despite difficulties with COVID and Brexit, Ocean Bathrooms have overcome to deliver the products on time; the project will open early 2022, with most apartments already sold and attracting a large amount of interest. Q.
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INTERIORS
5 TIPS FOR WORKING FROM HOME IN A SMALL SPACE DAVID IVES Head of Middle East and Senior Business Development Manager David Phillips www.davidphillips.com
Due to the pandemic, working from home has become the new normal and many people do not have a dedicated home office in their house, often sharing spaces with friends, family or partners. A home office in small quarters needs to be dual purposed, so your setup does not have to be a self-contained, independent space. As long as an ‘office zone’ is established during your working hours, you can create the optimum working environment. Our expert designer, Tali 018 – Qandor – Issue No. 16
Leggett says, ‘We’ve worked with a number of clients to make use of underused spaces in the home such as under the stairs, large hallways or alcoves.
We understand that incorporating a workspace into a small home may be challenging, but our designers have some top tips to inspire some productive spaces. Tip 1: Maximise your storage A well-designed workspace can increase your productivity. Workspaces should be clutter-free as mess can be a distraction. Storage space is helpful when reducing clutter and if you are dual purposing an area of your home as an office, it is useful to have somewhere work items can be stored at the end of the day to ensure you can properly switch off. Desks with drawers or adding shelving around the
workspace are useful for extra storage. Tip 2: Invest in a good quality chair An ergonomic desk chair is a home office must-have as it provides postural support and reduces back and neck pain. Ergonomic chairs have adjustable seat height to prevent neck strain and back slouching. A chair with lumbar support is also essential as it supports your back and corrects your posture when sitting. Tip 3: Add a decorative detail A worthy addition to any home office is artwork, as it has been demonstrated to increase productivity and inspire creative Issue No. 16 – Qandor – 019
“Working in a dim room can cause you to feel tired and lose focus”
thinking. Additionally, artwork can be used to spruce up your Zoom background. However, the background shouldn’t be too crowded that attention is drawn away from you. Tip 4: Prioritize light It is important your office is well-lit, as working in a dim room can cause you to feel tired and lose focus. Ideally, your workspace should incorporate natural light as much as possible, as natural light reduces stress, improves mood and increases productivity.
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In a small home, however, this may not be possible; therefore, a task light will do wonders. If you are short on desk space, a wall or floor mounted light works great. For the best lighting in Zoom calls, you should sit in front of the brightest light source in the room and have no windows behind you that might give a large amount of backlight. Tip 5: Slimline your furniture Slimline furniture takes up less room and therefore does not dominate space, meaning the area blends subtly into the rest of the room.
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PLANNING
GARAGE MUSIC: PLANNING & REDEVELOPING LOCK-UP GARAGES DAVID KEMP Director DRK Plannning Ltd www.drkplanning.co.uk
‘In the middle of difficulty lies opportunity.’ Albert Einstein Lock-up off-street garages can be seen around many of our towns and cities. They are a throw-back to earlier days of town planning but are now largely obsolete and bring with them a number of other problems. 022 – Qandor – Issue No. 16
Much of the time, they are too small to park a car in and tend not to be used much (if at all), other than as spare domestic storage or as a dumping ground for old furniture and rubbish. This creates a neglected and abandoned feel to some roads or estates, which can in turn attract anti-social problems such as drug users and dangerous waste. The fabric of these garages is also often deteriorating, often with asbestos roofs, often
harming the character and appearance of a street. As we look more closely at regenerating our towns and cities, improving environmental sustainability and reducing car emissions, it makes sense to look at these opportunities, whether on a larger scale in redeveloping blocks of garages on housing estates, or on a smaller scale where they create an opportunity for infill development. Pre-application with the Council So, all this makes sense and any proposal in front of the Council should be a ‘virtually guaranteed’ planning permission…? It is a great starting point. However, it will still leave open plenty of scope for the Council to argue different aspects around the scheme. We submitted a scheme for preapplication to Wandsworth Borough Council as 2 x 2-bedroom dwellings. The Council considered a number of issues that you can always expect would come up – such as window alignment or external
appearance, scale and bulk of proposed extensions to the rear, and materials. Generally, if the planning success of a scheme is largely down to these issues, then they are all negotiable. However, the key point that officers came back with was that they felt that the site was ‘too crammed’ for two dwellings, and they thought that the site should comprise a single-family 3-bedroom house instead. This would not have been a viable way forward for this site, and so we had to try and push back on this. Following-up: Testing the officers The first thing to do when trying to push back on what officers say in a preapplication is to simply ask: “Is there a policy justification for this?” After suggesting to officers that there was no such justification, we managed to essentially avoid the final pre-application response requiring a single 3-bedroom house on site. The tone of any follow-up with officers Issue No. 16 – Qandor – 023
is very important, even when seeking to test them on critical aspects of policy affecting the principle of what might be built on site. Here are some key points or perhaps ‘golden rules’: 1. Try to understand the rationale for the objection/issue – It needs to relate to a planning purpose or clear planning
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objective. 2. Is it supported by policy? – Without support in policy, then it is easily challenged, but check the supporting text to any relevant policies (e.g. on dwelling mix) as well as the policy text itself. 3. Try to speak with a policy officer BEFORE speaking again with the case
officer or their team leader – They might be able to confirm by email that their policies do not require at least one family dwelling on site.
4. Write to the case officer (copy in the team leader) to put your explanation to them having also confirmed to them (either with or without policy officer support)
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that there is no policy restriction – You need to do this before they settle their preapplication response, if possible. 5. I find it is most effective when coming at this from the point of view of a ‘Columbo of Planning’! – You do the detective work on the policies first, look for witnesses in support (e.g. policy officers), but then have a friendly but ‘intensely enquiring’ approach to the case officer. What do local Councillors think? Normally, even with a relatively small project such as this, there is an expectation amongst officers and often with local councillors that a ‘good developer’ will canvass the scheme locally first before submitting the application. This might normally encompass a local leaflet drop, and a public exhibition held at a local centre during the daytime and in the evening, inviting members of the public and seeking their views, as well as local
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councillors. However, this was simply not possible due to the pandemic and instead we sent emails and letters to immediate neighbours only (not the wider area or along the street, as we might otherwise have done), and directly to the three local ward councillors. This was a good early test of the scheme, managed local expectations and became a useful ‘touch point’ between our client and the neighbour to the left of the site. Many look up on any form of public informal consultation as a ‘rod for their own back’. In my opinion, if used well in respect of a well-planned and thoughtout and well-designed scheme, then it can smooth the path of an application. Locals feel engaged and involved, and it avoids unnecessary misunderstandings regarding the proposal. It also provides a platform to push home the negatives about the current use or development on site and emphasises the positive aspects in the proposal.
Mana gin g th e application timetable When any planning application goes in, you are only no more than ‘half-way’ there: 1. You need to get it registered and validated and chase this up to avoid weeks passing without Council action. 2. Be ready to chase the officers up for their thoughts 3-4 weeks after the validation, just as the minimum public consultation period draws to a close* (*People can still make objections after this until the final decision is made or written up for approval). 3. Be responsive and be ready to compromise on design matters for the sake of getting the permission over the line – Obviously, stand firm on some points where you need to, but you may need to be creative about solutions.
4. Get to a final ‘yes’ as quickly as possible – Easier said than done! This final point is of course all part of generally getting your permission ‘over the line’. There are a number of points to settle when you are coming to this point in the application. Getting it over the line Officers raised two main issues in the closing stages of the application – the roof line and the need for more windows to the façade, especially as they were concerned about the future management and care of the proposed ‘green wall’ between the semidetached houses proposed. Together with the architects and the client, we came forward with proposed design changes that not only delivered the effect that the planners wanted, but
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also were probably more cost-effective for the client without compromising on the sustainability and energy credentials of the scheme. Personally, I liked the ‘green wall’ in the scheme, but there’s not much point in retaining it in a scheme that gets refused planning permission! Once the design was settled, it was then just a matter of settling pre-commencement conditions with officers and then obtaining the final permission, which all happened within about 4-5 days after the design was finally agreed with officers. ‘Working with’ officers There is somewhat of a ‘dance’ that goes on all the time with the Council’s planners in most development schemes. However, one should never lose sight of the importance of trying to work with the planners as far as possible. Once matters of principle can be agreed, then most of the rest is negotiation. The local planning authority generally
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wants to go to appeal even less than you do! It drains Council and officer time and resources and often costs them money that they do not have. Therefore, establish a good relationship with the officers, test the scheme with them by all means and the parameters of their initial advice, but mutual respect and understanding, underpinned by a sound policy footing goes a long way toward securing planning permission. The destination makes it worth it! Planning permissions can deliver huge value to developers and investors, and there are few things as rewarding as transforming our towns and cities and neighbourhoods in a way that we can all be proud of. It can be a frustrating and testing process at times, but when we look back at what we started with and what we finally get over the line, more often than not, it is definitely worth the journey! Q.
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HOMES
COVER STORY / Q&A
SUSTAINABILITY IS THE WAY FORWARD PETER HUF Chief Architect Huf Haus UK www.huf-haus.com
Huf Haus revolutionised the architecture industry in 1972 when it opened a premanufactured showhouse with a glazed façade framed by black timber posts and timber beams. Since then, Huf Haus has become a big name in the architecture world, leading 030 – Qandor – Issue No. 16
the way with sustainable materials and methods of construction. In this exclusive interview, Peter Huf, Chief Architect at Huf Haus, tells us about the history of the company, where it’s going and his professional journey so far, as well as lessons learned.
The company is over 108 years old! Can you tell us how and why Johann Huf started HUF HAUS? My grandfather Johann was a carpenter master and, when he met my grandmother, he decided to move his carpentry business to her village, Hartenfels, and start a sawmill there because she needed to stay in the village to tend to her sick parents. My grandfather and grandmother were determined to have their own business despite having little money and no start-
up capital. My grandmother Maria was in charge of their small farm which was, at that time, their main source of income and crucial to generate capital for the business. My dad, Franz Huf, took over the carpentry business from my grandfather, and with the help of my mother, who played a crucial role of support, he worked to grow the family business. He invested into the factory and built premanufactured, timber-framed houses. Their design was factory-led but, at the time, not architecturally groundbreaking.
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They were assembled in the factory and then de-assembled and built onsite. During that time, he noticed the work of the accomplished architect Manfred Adams who had won awards for his “post & beam” architecture. Manfred Adams’s ideas were revolutionary at the time and inspired my Dad to replace his “traditional concept” with Adams’s “avant-garde post & beam architecture”. In 1972, without much support from his own sales team, my dad built the most revolutionary showhouse in the German market. At that time, no one in Germany had ever seen a premanufactured house where the entire facade was glazed and framed by black timber posts and timber beams. A true contemporary post and beam house was born where the wall is replaced
by generous glazing and where the wall is not load-bearing as in a normal timberframed house. My dad established a strong relationship with the architect Manfred Adams, which was crucial to developing the Huf house and which lasted throughout their lifetime. What’s next for the company? Once a company has defined their product, it is very important to safeguard the signature style; in our case, the modern interpretation of the classic post and beam architecture. At the same time, to develop new ideas for the future. Any company with a long-term view must be continuously refining their product and addressing the challenges of the day. In my view, the most pressing issue currently is sustainability.
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What does sustainability mean for you? Sustainability is a broad topic. I firmly believe that everyone should be doing whatever they can, no matter what their job or where they are. We have a responsibility to leave the world a better place. As an architect, I am acutely aware of sustainability in construction and I’m proud that HUF HAUS is a market leader in this regard, but as a person I am also very conscious of trying to incorporate sustainability into my private, everyday life. I believe sustainability starts as a mindset. When we embrace it in small ways in our personal life, we will find it easier and more natural to incorporate in our professional world. What do you believe are the biggest deterrents at the moment stopping developers from building sustainable or even zerocarbon homes, and how to solve this issue? Many developers pay a lot of lip service to the topic of sustainability, but there is an inertia across the industry 034 – Qandor – Issue No. 16
that prevents real change from happening. Many of the contributing factors are practical or financial; for example, there is a skills gap, with many builders in the industry lacking the know-how to build sustainable houses. However, I think that the more important factor is one of attitude: developers are often risk-averse, building the same houses they have done for years, and also tend to have a fairly short-term financial time horizon. I think the solution lies in developers recognising that building sustainably will actually create value in the long term, because a lot of the practical solutions to sustainable construction are already on the market. What is one way an architect can be sustainable that is not wildly known? People tend to focus on the sustainable technologies of a build, but can neglect the fact that the architect’s design concept needs to follow sustainable principles as well. For example, the design needs to demonstrate
efficient use of internal space, minimising “dead” space. The architect should work “with” the given topography and enhance its existing features. It’s all well and good to incorporate photovoltaic panels, but I’d like to see more architects maximising sunlight in their design through passive solar gain, or developing energy concepts based on local conditions. In my view, this is all part of sustainability. Do you believe we will ever reach a zero-carbon property and construction industry? I think we have no other choice. Eventually, the building industry as a whole will be forced into it. Maybe it will be through government legislation, or maybe it will happen because climate change has altered our environment to such an undeniable level that people are frightened out of complacency. I’m convinced that we will reach a zero-carbon industry because we have to. And quite frankly, there is no excuse not
to. We already have the technology to do it. Companies like HUF HAUS are building zero-carbon properties and have been doing so for years. What are some common misconceptions surrounding sustainable building? Many people believe that by adding some photovoltaic panels on the roof, they are building sustainably. While this is certainly a good move in the right direction, it is a far cry from a comprehensive solution. Other issues, like the impact of the chosen building material, the fabric efficiency of the outside walls, a no-draft environment, and good wall insulation values are all essential energy considerations. Tell us a little bit about your career and how you got where you are today. As a young man, I thought long and hard about what profession I would like to pursue. I had so many interests that I could hardly make up my mind. Being unsure of what I wanted to do after Abitur high school, I decided to follow the family tradition of learning
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the trade of carpentry and apprenticed in our family business. This early experience proved to be very valuable in later years. Working with wood helped me understand the material and see it as a versatile building resource. After my twoyear apprenticeship, I began my architectural studies at the Technical University of Koblenz. I was unsure, as many young people are, if this was indeed the right path for me, but by my second year, I realised that architecture was the perfect discipline to combine my many interests and I knew that I had chosen well. After graduating with my German architectural degree, I worked in America, first as a draftsman in a larger office, and then started my own business as an architectural illustrator before being accepted into a master’s degree course at the State University of New York in Buffalo. 036 – Qandor – Issue No. 16
After completing my Masters in Architecture, I moved back to Germany and worked with Manfred Adams. Six years later, I was asked by HUF HAUS to work on a project in the United Kingdom. This awardwinning project and the opportunities that followed were the reason I accepted HUF HAUS’s invitation to relocate to the UK with my family to design Huf houses. Twenty years and 250 houses later, I’m still in love with the British landscape and doing my part for sustainability in this country. What are 3 lessons that you learned in your career? An architect is exposed to many different challenges on many different levels. The design of a house, for example, needs to correspond with the plot, needs to be costeffective and structurally sound, and needs to meet the expectations of the client as well
as the planner. Managing these challenges without losing the main idea of the design is a key lesson I have learned throughout my career. I have learned to embrace the hurdles that present themselves, and to use the obstacles presented as a key to unlock new ideas and new creative solutions. I have also come to realise that just as many medical patients are not able to clearly describe their symptoms to a doctor, sometimes clients are unable to express their full aspirations or are unaware of the breadth of possibilities. A skill that I have had to develop is listening to what is not said and understanding those aspirations that are not verbalised. It is a joy then to hear a client exclaim that I have designed exactly what they wanted.
What would you say is the biggest achievement of your career? I’m proud to have gained the trust of so many different clients and to have had the opportunity to work on so many beautiful sites. It is the sum of all these special projects that tells the real story, rather than any one single award-winning project. I am in the fortunate position to be able to say that I have helped transform many sites into Issue No. 16 – Qandor – 0337
beautiful, beloved spaces. I have brought real joy to hundreds of people. What advice would you give for architects starting on their journey now? Working hard in your degree is certainly an important part of your architectural education, but it is your experience that will truly train you. Honing your skill takes time. Just like when mastering an instrument, it requires patience and perseverance, but the effort is well worth it. In my view, being an architect is the best job imaginable. What or who inspires you? The list of people who have inspired me is too long to talk about, so I’d like to concentrate on what inspires me. I find inspiration and insights in nature, science and philosophy. I like to consider what beauty is and how and why human beings are drawn to it, knowing that there can never be a definitive answer. I find it humbling the way the
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incredible patterns in nature put our human endeavours into perspective. Whenever I visit a site, it is the natural features of the plot that have the biggest influence on my design and are the source of my inspiration. What are your next steps? I think the best way to describe it is by using the analogy of playing the piano. In the beginning you invest many hours into practising the instrument. The longer you play, the more you enjoy playing and the music you create brings people joy. I intend to keep playing, eager to keep developing and growing, hoping to do my part to change the world – one house at a time. Q.
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PROPERTY FINANCE
SPECIALIST LENDERS ARE OFFERING HIGHER GEARINGS PAUL WATSON Head of Origination Blend Network www.blendnetwork.com Cash is king and ‘gearing is queen’. Over the past decade, a new generation of specialist development finance lenders have emerged that have sped and simplified the borrowing process for property developers and investors. But gearing, often overlooked, is specialist lenders’ strength. Paul Watson, Head of origination at specialist lender Blend Network, explains how gearing has become one of the 040 – Qandor – Issue No. 16
key reasons specialist development finance lenders have gained a competitive edge over traditional banks and non-specialist lenders. Gearing is the term used in the financial lending industry to describe the debt-toequity ratio in a particular deal. In the case of property lending, gearing is typically measured as the percentage of debt vs equity over the property’s total value. It is used by most lenders to effectively decide whether a particular deal is worth lending on and to be
able to appropriately price the risk associated with that deal. If the level of debt vs the equity in the deal is high, it is considered ‘highly geared’ and if the debt vs the equity is low, then the deal is considered ‘low gearing’. The specific level of gearing offered by lenders at any moment in time will depend on many considerations and will also change over time depending on factors such as the economic outlook, the market activity and the lender’s appetite towards risk. Generally, the development finance lender would want to ensure that if the value of the property declines, the borrower is not over-leveraged and can afford to service the debt. While cash is king, many property developers will agree that ‘gearing is queen’. Indeed, from a developer’s point of view, using leverage to expand a property portfolio is an extremely useful tool when used correctly. This means that for example, instead of investing £1,000,000 into a single deal, the developer could spread the equity across several deals by using debt. This also reduces the developer’s risk by lowering their exposure to one single deal and spreading it across several deals. On the other hand, lenders will calculate the suitable level of gearing that mitigates their risk should the market turn and the value of properties decline. This is a delicate exercise to offer a good deal to the borrower and minimum risk to the lender.
Higher levels of gearing are also among the key reasons specialist development finance lenders have been able to gain a competitive edge over traditional banks and non-specialist lenders. Due to their flexible structure and better understanding of the development finance market, the new generation of tech-powered regulated lenders are able and willing to lend on loans that non-specialist lenders would not dream of lending, let alone offer high levels of gearing. As specialist development finance lenders, at Blend Network we have funded many fantastic property projects where the borrower was unable to get funding from traditional lenders, but we offered over 70% gearing post-COVID when most other lenders were lending at 60-65%. For example, we recently funded a £2,600,000 facility which blended senior and mezzanine debt and geared it to close to 75% as a loan to Gross Development Value (GDV).
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PROPERTY FINANCE
“the new generation of tech-powered, specialist development finance lenders have been able to win over the minds and hearts of borrowers” Pre-COVID, specialist lenders would regularly offer 70-75% gearing in development finance. Even though that has been drastically reduced post-COVID to around 60-65%, the deep market understanding that some specialist lenders have allows them to offer tailored solutions which effectively blend senior and mezzanine debt and pushes up gearing to above 75% even now. This, in a nutshell, explains why the new generation of tech-powered, regulated specialist development finance lenders have been able to win over the hearts and minds of borrowers. Q.
Blend Network is a peer-to-peer (P2P) property lending platform that provides development finance and bridging loans from £150,000 to £5,000,000 to experienced SME property developers and small construction companies. More information can be found at www.blendnetwork.com. Blend Loan Network Limited is is authorised and regulated by the Financial Conduct Authority (Registration Number: 913456) 042 – Qandor – Issue No. 16
PROPERTY FINANCE
STRESS TESTING: HOW TO MAXIMISE YOUR PROFITS PAUL OBERSCHNEIDER Founder Hilltop Credit Partners www.hilltopcreditpartners.com
Development finance lenders will go through any potential property deal with a fine toothcomb when deciding whether to proceed and what rates they’re comfortable to offer. But it goes without saying that developers should stress test the deal themselves as a preliminary before applying for funding. 044 – Qandor – Issue No. 16
The 4 key metrics to stress test that will underpin maximising development returns are as follows: 1. Market depth and absorption When putting together property finance, you need to know the market depth and market absorption. In layman’s terms, how many units can you sell, and how big is
the market in your chosen area? These will be different for a city centre development than they will for a block of 20 flats near a market town high street or a small rural scheme. Local knowledge is vital to stress test these metrics. Analysing the property portals and enquiring to local agents will give you a good idea of what’s selling and in which quantities allowing you to assess local supply and demand. There’s also a wealth of information at hand on market comparables using tools like Realyse and the Government’s Housing Delivery Test. 2. Exit route Assumptions can be a very dangerous thing. Never just assume you’ll be able to sell all the units needed to effortlessly hit your targets. You need to be confident you’re building the right stock in the right location for the right target audience. Stress test what happens to your exit route based on different levels of unit sales over different time periods. Also, consider your ability to refinance if needed. What would pricing be like? How much leverage can you get? Speak to brokers and banks and look at how this affects the business case for your deal. 3. Build costs & profitability Build costs and profitability You need to analyse how achievable your budget is and how reasonable your profit projections are. What’s the cost per sq. ft? What’s the GDV per sq. ft? Compare these metrics with data from BCIS. Then, run a few scenarios where your GDV and/or costs go up or down between 5 and 15% and see how the deal stacks up. If you make enough to repay your investors
and development lenders under adverse conditions, you’re likely onto a winner. This doesn’t mean you need to fixate on achieving certain levels of profitability (like getting a leveraged return on costs of at least 20%, which is something you see bandied about a lot). It’s about looking at the entire project and commercials holistically - making sure your deal will deliver. Your returns should be considered in percentages, multiples, and what you’ll make in cold, hard cash. 4. Project duration The fourth key metric to stress test is how long your project will take. How will duration and – worst-case – any delays affect the deal? Will you be able to pay back loans? How will interest accrue? What happens if a loan expires before you’re finished? What happens if you have to miss payment deadlines because of delays? How will your lenders react? Make sure you build in enough of a buffer so you can go on-site every day without worrying about the implications of missed deadlines. The best development finance lenders will scrutinise your timelines anyway, so it’s to your advantage to be realistic, not to mention honest. Work with your finance providers, not against them. You’ll secure a better deal. Stress testing the fundamentals is the best place to start. Q.
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MORTGAGES
SEMI-COMMERCIAL MORTGAGES LEE LANGLEY Principal OnPoint Mortgages www.onpointmortgages.com
A semi-commercial mortgage is designed for securities that consist of both residential and commercial elements. It covers a wide array of properties, including shops, offices, restaurants or pubs with flats above, as well as guest houses with living spaces. Typically funded by a commercial lender, pricing is cheaper than that of a purely commercial property. Investors are drawn to semi-commercial as they are exempt from the 3%
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stamp duty surcharge, and having multiple tenants can de-risk the complete loss of rent. Lenders in this market space can be broken down into three main groups: high street banks, challenger banks and specialist lenders. High street banks will offer the cheapest rates priced on a bespoke basis, albeit the loan-to-value (LTV) may be lower than that of the other two routes. Criteria and the affordability assessment are tougher, with
lenders looking for experienced applicants, long leases, strong tenants and higher quality securities. Challenger banks and specialist lenders will typically be more flexible than the high street options regarding the above factors and be comfortable with interest only lending. Affordability calculations vary with no universal approach, but lenders will ensure the investment is viable. If you are planning on letting a unit, they will assess based on the expected rental income and you should be prepared to provide copies of any leases or ASTs. During the pandemic, lenders’ stances on semi-commercial property have been adapting quickly to lockdown restrictions and its impact on different sectors. They will factor in how a commercial tenant has been impacted during this period and the likely
effects moving forward. If you plan to use the commercial aspect for the running of your own business, they will want to see that the projected income of the business is sufficient to cover the loan. For businesses with an existing track record, be prepared to provide 2 years of accounts and between 3-6 months of business bank statements. It is important to engage a mortgage broker that understands this space and the way to present your application to a lender to maximise the chance of success. When using a challenger bank, you need at least 25 to 30% deposit. At the time of writing (28th of June 2021), Hampshire Trust Bank have a 75% LTV product priced at 5.1% on a 2-year fixed and 5.2% on a 5-year fixed for loans over £200,000. The lender arrangement fee is 2%. Issue No. 16 – Qandor – 047
“Challenger banks and specialist lenders will typically be more flexible than the high street options”
Interbay have a 70% LTV product priced at 5.29% for a 2-year fixed and 5.39% for a 5-year fixed with a 1.5% lender arrangement fee which drops to 1.25% for existing borrowers. If we look at options with building societies, Monmouthshire have a 4.54% 2-year fixed at 70% LTV with a 1.5% lender arrangement fee. Q.
Your home may be repossessed if you do not keep up repayments on your mortgage. Some forms of buy-to-let mortgages and some forms of commercial lending are not regulated by the Financial Conduct Authority. Lee Langley is the Principal Mortgage and Protection Adviser at OnPoint Mortgages. OnPoint Mortgages, a trading style of L&D Mortgages Limited, is an appointed representative of The On-Line Partnership Limited which is authorised and regulated by the Financial Conduct Authority. Registered address: 25 Homefield Road, Bushey, Hertfordshire, WD23 3AP. Registered in England & Wales under 10500099
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CROWDFUNDING
THE FINANCE MARKET POST PANDEMIC MICHAEL BRISTOW CEO & Co-founder CrowdProperty www.crowdproperty.com
CrowdProperty CEO Michael Bristow discusses how the specialist finance market has changed as a result of the pandemic, how market demand is changing and what funding products needed. There’s no doubt that the pandemic has had a major impact on the specialist finance lending market. Most funders in the market were exposed with single sources of capital, and they were the first to shut up shop as COVID-19 set in. Even those with multiple sources were exposed as those sources had exactly the same underpinning exposures to equity market 050 – Qandor – Issue No. 16
volatility and lending attitudes. CrowdProperty’s uniquely diverse sources of capital from retail, high net worth, ultra-high net worth, private fund and institutional sources have enabled us to be open for business throughout these tougher times. These diverse types of capital with different needs, preferences and attitudes, built up by seven years of lending with a perfect track record, give far greater reliability of funding through any stage of market cycles. As a result, we’ve been able to support existing and new borrowers – picking up the pieces for many who have had agreed funding lines cut, even partway through projects. We have also seen other funding
providers pulling out of refinancing completed projects. The projects have been successfully completed and value has been added. We have been working closely with current borrowers and other borrowers stuck on expensive late interest rates with other funders, assessing each on a case-by-case basis with an expert eye and working through the best solution for all concerned. We’ve had a ‘Development Exit’ product for years to allow for final touches and sales timelines, which has understandably become a very popular helping hand in the current market – releasing the commitments of an expiring development finance loan and providing breathing space to achieve the most successful exit for the project. We’ve seen rising interest in our ‘Airspace Development Finance’ product following the new PDR that came into force in August 2020 as developers pursue ambitious and creative opportunities by
unlocking the potential development space above existing buildings in desirable locations. The launch of our dedicated ‘Modern Methods of Construction Finance’ product that, amongst other things, addresses the unique cashflow challenges of MMC construction approaches also reflects changes in the market. Our ‘Bridging Finance and Auction Finance’ products guarantee delivery of the finance needed to help developers secure a property purchase within tight timescales and grow their property business quicker. Bridging Finance can also span stages through a property project, unlock capital from an asset or fund a moderate level of works. We’ve made greater use of multiple bridges to cost-effectively lend across the project cycle; for example: taking a bridging loan to purchase in order to gain advantage in a competitive market and secure deals and/or add value by planning to leverage the equity position, then Issue No. 16 – Qandor – 051
development finance, then development exit to cope with problems in the term lending market obtaining refinancing or sales. This customer-focused approach is much more cost-effective for the borrower and enables us to support the SME developers we work with throughout their projects. Speed, ease and certainty of finance is key to developers spending less time sourcing funding and more time completing their projects to grow their businesses quicker and more profitably. At CrowdProperty, we leverage our proprietary technology for efficiency and deep property expertise for effectiveness of lending – and this is even more important in the complex world of property development. Our proposition is underpinned by technology-enabled systems, processes and algorithms, as well as using machine learning and big data analysis to process loan applications. As the UK’s leading specialist property project lending platform, we’ve now funded the development of 1,501 homes worth £300,000,000, originating £181,000,000 of agreed facilities and lending £141,000,000 to date. This has supported over £120,000,000 of spend on
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labour, materials and services in the UK economy. The reliability of lending and knowledgeable support we have been able to offer SME property developers throughout the past 12 months is attracting more and more developers and more and abundant capital from private investors and major global institutions, including the recently announced £300m institutional funding line agreement with a new major investment manager. These institutions only look to work with the best platforms – giving deep pockets, validating institutional grade investments, and only backing the highest quality players after months of due diligence. Whilst the diversity of our capital sources and deep expertise is partly responsible for our market leadership, our innovative and customer-centric FinTech / PropTech approach sets us clearly apart. As a true funding partner for your team, we help you grow your property business more quickly and more profitably – we’ve built the customer-focused lender that we wanted when we were undertaking property projects ourselves. Q.
Find out more about funding your projects better and growing your property business faster and more profitably at www.crowdproperty.com/apply.
Qandor Affiliates
Catax
CrowdProperty
David Phillips
Capital allowances
Crowdfunding
Interiors
Hilltop Credit Partners
Keystone Law
Leadenhall Wealth Management
Stretch senior funding
Mesh Energy Renewable Energy Consultancy
OnPoint Mortgages
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Mortgage brokerage
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