Comment
The yes, but problem causes long delays
Bridging lenders are clamouring for business but delaying for months
OFF SHORE TAX MITIGATION
by Julian Ingall, director,
Coreco Specialist Finance
There are banks lending on development finance but more often than not, the bank states that they are lending, then delays and delays and finally refuses to lend without restricting the loan to value or applying unrealistic covenants. The client then becomes frustrated with the bank and or the broker after a three month delay and asks what else is on offer. Sound familiar? I’ve had as many clients in the past three days in this position, haven’t we all? So what do we then advocate?
MARKET PRICING
Pricing wise the clearing banks are indicating 3.5% to 4% over base with a 1.5% arrangement fee and up to 1% exit, total annual fees of circa 7% per annum. But where next? The jump to the next stage is some of the societies but they are not typically lending on limited companies. And then the likes of the Close Group where a percentage of gross development value as an exit fee is the distorting factor on overall cost. The annual cost then jumps close to 10% to 12% per annum. Then the bridgers step in at anywhere from 12% to 20%.
18 BRIDGING INTRODUCER MARCH 2012
Brokers who deal with the larger more complex property transactions will be familiar with clients buying shares in the offshore companies that own property and stamp duty mitigation schemes. It’s a constant debate that we have with clients but clearly this is an advantage that some of the bridging community has over the nationally owned lenders. Maybe this in an obvious point and I’m not advocating stamp duty mitigation schemes but for the sophisticated borrowers with a capable “brief” significant savings may work.
OUTSIDE THE BOX In the past month we’ve done some interesting deals including two caravan sites on the Isle of White bought out of administration for £10m, a trading pub in St Albans with no accounts, and a buy-to-let in the Isle of Man with no income. My favourite topic of the moment is funding a Hanse Haus in Surrey. For the readers who don’t know what a Hanse Haus, it’s similar to a Huf Haus. No? Still don’t know what that is? Basically a house made in a factory in Germany shipped over on lots of lorries, constructed and made water tight in four days and arguably the most ecological and efficient build you can get in the world right now. As we say in Houndsditch: Vorsprung durch technik.
Nationwide and Lloyds Banking
Group have indicated they are happy to lend on this construction - why wouldn’t they? It has a premier guarantee. But I find the ignorance in the bridging sector frustrating. I understand this isn’t a standard construction design and many of the general public won’t have heard of it, but this is the future. It’s called Google fellas. And it’s very easy to do the research these days. I spoke to a reputable valuer in our market who explained to me that the general bridger opinion was: “Well if the building can be constructed in four days then it can be taken down in four days.” Bridgers are quite simple people, he told me. By this stage I was swallowing hard and trying to see the position from his point of view, I couldn’t and could only use sarcasm to prevent my outrage of his comment so I agreed, stating that he was probably right. And that no doubt the neighbours and client wouldn’t notice seven articulated lorries turning up and taking away a building with a 130ft crane and that if I wanted to dismantle most 4,000sqft houses I could probably do that with my mates from Brightstar in about two days if I fed them with enough beer for the night. (Jokes). Thankfully not all bridgers see this the same way and take the time to understand such a project, and the finance is progressing.
www.mortgageintroducer.com
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