Sirius Property Finance has strengthened its Investment team, with the recruitment of Kelly Rule as Senior Associate.
With more than 15 years’ experience in property finance, Kelly has held roles at Santander and One Savings Bank, where she progressed from an underwriter for InterBay Commercial to become a Senior Business Development Manager. She became a broker in 2019 and has since won awards for Best Individual Newcomer and Rising Star of the Year, as well as making the shortlist for Best Buy to Let Broker. Kelly has also been named in the most recent Top 30 Power List for bridging and commercial lending.
Nicholas Christofi, Co-Founder at Sirius Property Finance, says: “We are continuing to build an unrivalled team at Sirius and I’m delighted that we’ve been able to attract another industry heavy weight. Kelly has made a huge impact in her short time as a broker, winning a number of high-profile awards in the process. Her lender background has put her in a strong position to succeed, but it’s her attitude and client focus that really help her to stand out from the crowd. Kelly’s skillset and expertise will further enhance a core division of our business.”
Kelly Rule, Senior Associate, Investment at Sirius Property Finance, said: “I’m delighted to join the stellar team at Sirius Property Finance and look forward to helping them structure the best solutions for a whole new group of clients. I like to see myself as a problem solver for clients, advising them on the finance package they need to get the best results from their property investments – and this approach aligns with the commitment Sirius has to structuring financial solutions. ”
Bridging finance is a particularly versatile product and, in recent years, with increased broker and borrower education and engagement, more uses of bridging have been identified as solutions to a range of funding problems. One of the key features of bridging has always been speed and this remains today.
This is why the increased use of automated valuation models AVMs in bridging finance is so interesting. An AVM can save a week, or even more, on an application. It’s not simply the time it takes for a surveyor to complete and return a report, it is also a matter of surveyor availability. Often, experienced surveyor firms with local knowledge are in high demand and their availability is limited. When speed is a consideration, this local knowledge sometimes has to be sacrificed for a more transactional high-volume approach, which sometimes offers little more in terms of value than an automated model.
As much as borrowers are encouraged to start the legal process at the beginning of the application to speed up the process, they often prefer to wait for the valuation report to be returned, for understandable reasons. The issue here is that even lenders with the most efficient processes will not be able to complete on a loan particularly quickly if they need to wait for the outcome of the property inspection before the legal process can begin. Certainty of a property’s value at the point of application is critical as it not only impacts the loan amount, but also the rate. Lender pricing varies at different LTVs, and while a lender may have more favourable rates at one particular LTV, it may not have the most favourable rates at another.
An AVM can give a broker certainty at this stage, allowing them to confidently issues a term sheet that will not changes as a result of a valuation. The key thing is that, having established the outcome of the AVM, there is then the option to instruct a surveyor if the figure provided appears overly conservative. For me, as somebody advising clients, certainty of outcome and removing as many unknown elements as possible is absolutely key. Particularly if there is a deadline that needs to be met.
Another obvious advantage of AVMs is the reduced, up front, and overall cost to the borrower. There is ordinarily no fee for an automated valuation, whereas standard valuations can cost thousands of pounds, particularly if more than one property is being used as security. AVMs are certainly helping to streamline the bridging process and the increased use of automation will continue to prove a benefit to clients. If AVMs can be combined with a solicitor who is experienced with bridging finance and understands the nuances of this sector, there is no reason why speed won’t continue to be one of the biggest benefits for clients taking out bridging finance.
Originally published in Business Moneyfacts Magazine.
New research from debt advisory specialists, Sirius Property Finance, reveals that the UK government’s Levelling Up Home Building Fund is unlikely to provide enough funding to provide loans to all of the nation’s small and medium sized (SME) developers.
Boris Johnson’s UK government has launched the development finance fund in order to help SME developers increase their home building efforts in order to “bolster house building and diversify the market”. But what exactly is the Levelling Up Home Building Fund, and to what extent does it benefit the UK’s SME developers?
The initiative will see government loans given to SME developers to help fund new residential-led development projects across the UK with the rationale being that smaller firms often struggle to get adequate funding from private lenders who are more keen to lend to the country’s biggest developers.
To be eligible for the loans, SMEs must be a UK-registered corporate entity or limited liability partnership (LLP), must have majority control of the site they plan to build on, and must be planning to build or refurbish at least five homes. Refurbishments must, however, focus on units that are uninhabitable at the point of application. Furthermore, the government insists that projects must be located in England, be “financially viable”, and be in a position where progress would be much slower or altogether stall without the additional finance.
The fund boasts a total pot of £1.5 billion and the minimum loan that SMEs can apply for is £250,000. With an estimated 2,500 SME developers in the country, it works out that there is £600,000 available for each. However, current market data show that firms are typically applying for loans between £2 million and £5 million.
Even working with just that minimum value of £2 million means that the £1.5 billion pot can only stretch to cover 750 SME developers, leaving an estimated 1,750 SMEs without finance. Of course, not all firms will borrow as much as £2 million, and some may not apply to borrow anything at all, but if the government is serious about helping SME developers and, thus, helping the UK economy ‘Level Up’, they need to pledge far more than £1.5 billion. A figure of £5 billion would at least cover every SME taking a loan of £2 million.
Developers who take a loan will, of course, be subject to interest and fees. The government states that it will charge firms an ‘arrangement fee’ and that interest will be charged at ‘commercial rates’. It is estimated that the arrangement will have a value of 1-2% of the loan value, and that the interest rate will be around 4%.
With a loan of £2 million, this means the arrangement fee will be £30,000, and the interest will be £80,000 per annum.
Managing Director of Sirius Property Finance, Nicholas Christofi, commented:
“Creating a more level playing field across the housebuilding sector is not only important for the industry, it’s important for the wider health of the economy and, ultimately, the nation’s homebuyers.
So it’s reassuring to see the government recognise the role SMEs play in achieving this balance within the sector, offering additional support via the Levelling Up Home Building Fund.
However, based on the size of the fund in relation to the sums being borrowed, it seems as though the amount of funding is, as it stands, inadequate. While some help is certainly better than no help, the government has some ambitious plans to fulfil in levelling up the nation and our SMEs are likely to be one of their best tools in achieving these plans.”
One of the most important factors for Borrowers to consider when securing the best short-term finance deal is the relationship between the Broker and the Lender, although this is often over-looked in favour of marginally cheaper interest rates.
As with any other sector of business, specialist finance is built on relationships and Borrowers who are able to find the right Broker partner with the most appropriate, established network can present a multitude of benefits. From enhanced LTVs to exclusive incentives and significant cost savings borne of experience in helping Borrowers to navigate costly potential mistakes before they happen, all are on offer for those willing to spend just a small amount of time on this important initial step.
Reputable Brokers such as Sirius have a combined number of years expertise that no individual can rival. This makes them an attractive partner for Borrowers and Lenders alike.
If you are considering short-term finance, here are ten reasons why finding the perfect Broker / Lender relationship is well worth your while:
- Structuring a loan
There are some reasonably complex products on the market with varying and often stepped rates and differing upfront charges, as well as a myriad of terms and conditions. The best Brokers will work with the Lender to navigate all of this and structure the right deal for every individual Borrower, maximising the benefits and minimising the risk for all parties.
- Borrowers or lending that is outside of criteria
Specialist finance can be an attractive option to Borrowers who don’t meet the lending criteria of commercial banks who so often rely on a simple, binary ‘box ticking exercise.’ The Broker / Lender relationship is invaluable in this situation, with both parties working together to look at the complete profile of the Borrower including the individual’s list of assets and liabilities; ultimately saying ‘yes’ when others say ‘no.’
- Borrower experience
If you are new to bridging and development, then the engagement of the right Broker to manage your loan transactions can be a wise investment. The Broker will pair you with the right Lender to match your experience levels, often resulting in the helpful inclusion of monthly reviews throughout the course of the loan to help keep everything on track.
- Senior level intervention
When working with the right Broker you can take comfort in the fact you are dealing with a team of highly skilled individuals. Should obstacles arise, the strength of the relationship between Broker and Lender is invaluable, meaning the most senior team from both parties is immediately on hand to make quick, autonomous decisions to resolve matters swiftly and professionally for you, the Borrower
- Discharge of planning conditions
The best Broker / Lender relationships ensure that the nominated Quantity Surveyors can work efficiently and effectively with both the client and the planning office to make sure all planning conditions are satisfied with zero time-consuming issues.
- Registration of title
An Broker / Lender relationship will often also facilitate the Lender’s lawyers initiating and concluding the registration of title; this is one less onerous task off the Borrower’s long list.
- Lawyer inexperience
Sadly, there are a great many Borrower’s lawyers who aren’t experienced in bridging and development finance. The right Broker / Lender relationship benefits Borrowers by providing access to the best, specialist legal expertise, providing guidance to all parties throughout the process. This often starts with an ‘All Parties Legal Call’ as a case progresses into solicitors’ hands.
- Local intelligence
An Broker’s level of knowledge goes far beyond understanding how to structure the best deal. They have an unrivalled knowledge of the local area. This is invaluable to the Borrower when trying to arrange deliveries to an awkwardly positioned site or gain access to unpermitted areas.
- Access to the right people at the right time
Questions don’t always arise from Monday to Friday, 9am to 5pm. A Broker / Lender relationship benefits Borrowers by providing direct and unlimited access to a qualified and experienced Underwriter throughout the application process and term of the loan, providing on-hand guidance 24/7.
- And if the worst does happen…
On occasion, the very best managed developments don’t go to plan. In these situations, the Broker / Lender relationship really comes into its own by enabling sensible and pragmatic conversations to be had in conjunction with the Borrower to find acceptable and reasonable solutions which aren’t punitive.
If you would like to find out more about the Broker / Lender relationship contact Kimberley Gates, Head of Strategic Partnerships at Sirius – email@example.com
Your home may be repossessed if you do not keep up repayments on your mortgage or a loan secured against it.
The Financial Conduct Authority does not regulate some aspects of corporate financial planning, short term lending, property investment or buy to let lending.
For intermediary use only and not intended for the general public
Hari Patel, Senior Associate, Structured Finance, answers some of the commonly asked questions Sirius Property Finance receives from those new to real estate development with regards to their development finance application.
How much development finance can I borrow?
The loan amount is based on a percentage of the gross development value (GDV) at the end of the work, typically up to 65% LTGDV, although this can be increased depending on the project.
However, a refurbishment loan is likely to be a more suitable option if seeking a smaller amount to borrow.
Loans are typically structured to ensure that the developer’s contribution is utilised up front, with the lender providing the majority, if not all, of the build costs. It is usual for funds to be drawn down in stages against architect’s or quantity surveyor’s certificates.
Projected gross property development values will influence loan to project costs, but funding is available on occasions of up to 90% of the purchase price and build costs.
It is often possible to organise a loan to finance up to 100% of the property development costs where the borrower already owns the land on an unencumbered basis, or can offer additional tangible security.
It is important to note that the amount you can borrow is based on the strength of your proposal, and this is where the knowledge and experience of your real estate debt advisor can make a real difference.
How long can I borrow for and when should I apply?
A property development loan is usually arranged on an interest-only basis, and the term of the loan would typically be 6 to 36 months, depending on the size and nature of the underlying project.
Sirius Property Finance negotiates finance requirements with a full panel of property development lenders and other financial institutions to provide the right ‘match’ to the project.
Development funding without full planning consent is challenging to secure unless you are highly experienced and have completed several development projects. Before seeking finance, it is essential to finalise planning consents and have all relevant documentation available to show your lender.
What rates can I expect to pay for development finance?
There are no set rates for property development finance.
That’s where Sirius Property Finance comes in. With years of experience in this field, we know what information should be included within an application and how best to present it for submission.
Sirius has access to some of the market leaders in this field and work with a panel of specialist property development lenders and other institutions to find the right match and negotiate the best rate for each proposition.
The lenders assess each application individually and price according to the strength of the development proposition and the borrower. Currently, a good benchmark for pricing starts from around 7%. Usually, the interest can be rolled up into the loan, so there are no monthly payments.
The pricing varies according to the nature of the project, and can be much lower, or higher, depending on the LTV requested, or the asset class being built.
For example, Sirius works with banks that specialise in funding prime central London developments, where pricing can be as low as 5%.
YOUR DEVELOPMENT FINANCE APPLICATION
Where to start:
Once the project has been identified and viability, costs, end value and profit margin, have been roughly worked out, contact Sirius to discuss your requirements.
It doesn’t matter if you don’t own the land/site yet – we’ll structure the acquisition finance as part of the development finance.
Sirius will present your unique development proposition with the most favourable providers and, if successful, will provide you provide you with an outline (known as indicative terms) of the rates and terms you can expect in the finance market, including a breakdown of anticipated costs and fees.
If the indicative terms are acceptable to you, Sirius will compile the proposal and submit your application to the most suitable lender.
You should be prepared to provide a full development appraisal to include the following:
- CV and evidence of previous development projects/experience
- Details of the planning consent including any restrictions, Section 106 or Community Infrastructure Levy requirements
- A full breakdown of the development costs
- Likely end value of the project (known as the Gross Development Value)
- Schedule of works and build stages
- Timetable for release of funds which ties in with the end of each stage of the build
- Asset and liability statement
- Financial accounts
- Full details of the professional team involved
- Proof of identity
- Exit strategy (e.g. sale or refinance)
Research by real estate debt advisory specialists, Sirius Property Finance, has shown that while the level of new homes being granted planning permission dipped during the first year of the pandemic, this negative trend reversed in 2021 with the third highest annual total since 2007.
The research shows that during the first year of the pandemic (2020), just 295,000 residential homes were granted planning permission, an annual decline of -10%. This was the lowest level since 2015 and only the second year on year decrease since 2010.
However, over the last year a total of 319,000 new residential homes were granted planning permission, an 8% annual increase and the third highest annual total since 2007.
London looks set to see the biggest boost to new home stock levels, with planning permission granted for 60,200 residential units over the last year, accounting for 19% of the national total.
The South East saw the second highest level with planning permission granted for 46,500 new residential units equating to 15% of the overall number.
The North West (42,300) also saw planning permission granted for over 40,000 new residential homes, while in the North East, just 13,800 planning applications were granted equating to just 4% of the total seen across England.
Nicholas Christofi, managing director of Sirius Property Finance, said: “There’s no ‘new money’ in the loan announcement of £1.5bn, so let’s hope that the government continues to provide support to SME housebuilders on an ongoing basis, not just via a few initial, headline grabbing gestures.”
Research by real estate debt advisory specialists, Sirius Property Finance, has revealed that while SME housebuilders account for just one in five properties currently for sale on the market, they command a 46% price premium.
Sirius Property Finance analysed current market stock for new-build homes across the UK looking at what percentage were accounted for by the big housebuilders versus SMEs and how they differed where market value is concerned.
The research shows that 20% of new-build properties currently available on the market had come via small to medium housebuilders, with large developers commanding a far superior market share in comparison.
However, when it comes to the price these properties are fetching in the current market, SME housebuilders were some way ahead of their larger competitors.
The average asking price for a property listed by a major developer came in at £370,727, while those listed by SME developers averaged £543,108 – an impressive 46% premium.
That means for every property sold, SME developers are making £172,381 more than those sold by large developers.
Head of Corporate Partnerships at Sirius Property Finance, Kimberley Gates, commented:
“The nation’s large developers have far superior resources compared to your average SME and so they predictably account for the lion’s share of new homes reaching the market.
However, this mass production approach isn’t without its drawbacks and, as a result, SME developers are outperforming them where market values are concerned.
This is generally down to their quality over quantity approach and while many larger housebuilders are delivering stock to all thresholds of the market, SMEs tend to predominantly focus on more unique developments, requiring a higher specification of property in locations that command the best market prices.
At the same time, they also have a greater ability to utilise better materials and the final product is also finished to a higher standard in terms of quality checks and the rectification of any snagging issues.”
The leadership team of the Brightstar Group has regained a controlling stake in the business, completing the acquisition of the remaining Private Equity-owned shares in an all-cash deal.
The transaction, which comes on the back of a record year for the Brightstar Group, means the leadership team now owns a controlling stake in the Group, with a 54% share in the business.
The announcement comes on the day the Brightstar Group, which includes Brightstar Financial and Sirius Property Finance announced record financial results for 2021. The Group delivered a 28.1% increase in turnover on 2020, rising from £8.1m to £10.4m, and posted a 42.8% increase in capital reserves. Group headcount increased by 15.9%, from 63 in January 2021, to 73 in January 2022.
Lending across the Group rose by 31.7% in 2021 and the business is on a current run rate to deliver £2.078bn of lending this year. The overall Group annual turnover is forecast to increase by 30.2% to £13.5million in 2022 compared to £10.4million in 2021.
As part of its ongoing growth and development the Brightstar Group has today launched a new group website, featuring key information about the brands, people and ongoing strategy. The new website is available at thebrightstargroup.co.uk.
Robert Sinclair, Chief Executive at the Association of Mortgage Intermediaries (AMI), said: “The mortgage intermediary and advice community continues to go from strength to strength. This announcement from Brightstar should be celebrated across the industry as we see a firm that has raised finance to grow and is now able to restructure based on its profitability and creative leadership. This is indicative of an intermediary sector that is growing up and maturing into a real positive force for good.”
Adrian Moloney, Group Intermediary Director, OSB Group commented: “Congratulations to the leadership team at the Brightstar Group who have taken this important step in retaining control and supporting their future growth. Transactions like this are a good indication of the strength of the intermediary mortgage market and, in particular, the specialist distribution sector. We’re looking forward to working with the Brightstar Group on future developments as they continue to evolve this exciting part of the market.”
Rob Jupp, Group CEO at the Brightstar Group, said: “Returning a controlling stake of the Brightstar Group to the leadership team is a massive achievement. We, rightly, looked for external investment to help us grow six years ago and because that growth has been so successful and sustained, we are now in a position where we have been able to buy those shares back. It’s an opportunity that very few businesses have, and it means that we have regained and retained our independence – we don’t have to answer to a corporate shareholder. This is great news for all of our customers as it means, not only do we have full autonomy to continue to invest in our people and technology to develop our proposition, but they can also be assured that we operate without bias or interference.”
Managing Director of Sirius Property Finance, Nicholas Christofi, was more hopeful of the new housing plans.
He said: “It’s great to see the Government’s intent to support SMEs by making them the focus of their levelling up plans.
“The agile and adaptable nature of these smaller house builders should pay dividends when it comes to improving the prosperity of our nation.
“That said, there’s no ‘new money’ in today’s loan announcement of £1.5 billion and so let’s hope that the Government continues to provide support to SME house builders on an ongoing basis, not just via a few initial, headline grabbing gestures.”