Privately funded

What proportion of the bridging market is funded by private money?

A recent poll conducted by Bridging & Commercial found that the bridging industry was fairly split on how the sector was funded.

Some 38% of respondents said that the minority of the bridging finance market was funded by private/family office money, with 36% saying the majority and 26% believing it was equal to the main bridging players.

The results follow a recent article by Bridging & Commercial where a specialist finance broker claimed that more non-principal lenders were expected to enter the bridging market as investors looked to improve yields on funds.

What does the industry think?

“I am surprised by the poll, ie over 60% of people thought that private/family office money was either the same or greater than institutional funds in the short-term lending market,” said Chris Whitney, head of specialist lending at Enness.

“Personally, I think that the bulk of the market is still currently institutionally funded, so would have thought that figure would have been less.

“However, I don’t think we have a real handle on how much the private sector is actually contributing.

“It is clearly very important, but I can’t see us being able to accurately quantify that any time soon.”

Geoff Wilson, managing director at White Rose Finance Group, added: “My view is that funding in the bridging market from private funding sources – such as private UHNW investors and professionally managed family office funds – is probably equal or above the traditional funding routes and that wholesale bridging funding lines from the major clearing banks will continue to diminish.”

Zed Lorgat, principal at JM Financial, believed that more than 50% of the market was funded by private/family office money.

“It always has been, it is only in the last couple of years that banks and funds – [which] wouldn’t normally have been involved in the lending market – are looking to bridge funds and lending purely because interest and bond rates are so low from an investment perspective that they need to look to other forms of income, [with] bridging loans being one of them.”

However, Zuhair Mirza, principal at Avamore Capital, expected a market view much more weighted towards institutional capital.

“Our impression is that private investors have a higher floor pricing as compared to institutions.”

Colin Sanders, CEO at Tuscan Capital, revealed that when setting up Tuscan, he explored the various funding options available.

“Using purely private money was certainly a possibility.

“But I was pleasantly surprised by the range of options available elsewhere and the erudite interest shown by potential, and enthusiastic, investor partners.”

Could we see a change in how the bridging market is funded?

“Going forward, I believe we will see an increase in funds coming into the market from certain challenger banks, [which] need to see funds deployed via block facilities, from private investors and increasingly via the growing number of P2P platforms [which] will strive to deliver higher rates of return for investors,” said Geoff.

Paresh Raja, CEO at Market Financial Solutions, claimed that larger banks and institutions had targeted the alternative finance market in recent years and were injecting a significant amount of funds.

“This is a trend we are likely to see continue in the future.

“And while this will open up new funding lines, lenders need to be cautious; these larger institutions will generally require higher returns and can sometimes try [to] exert an element of control during the lending criteria process, which could undermine the autonomy of the lender.”

Zed believed that more investment funds and private banks were showing interest in the bridging market.

“Although on the other hand, fears of Brexit and uncertainty may counter this as certain funds or funders could pull out.”

Chris added: “I don’t think we will see any marked change in the funding of the UK market in the short term, but that might change when the terms of Brexit are known.”

Colin felt that there were still investors out there looking for decent returns, but added: “While there will always be a place for private money in bridging, I’m certain that future growth will be fuelled largely by outside investment.”

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