Commercial Bridging: Why the alternative route isn't madness

Commercial Bridging: Why the alternative route isn't madness


By Louise Fernley


For a number of bridging lenders the prospect of lending almost purely on sizeable commercial investments would not just be scary, but unthinkable.

However, there is a player operating in the current bridging market that is not only focusing on these more unconventional deals, but genuinely loves them.

The family-run, commercial bridging lender Alternative Bridging Corporation, (ABC), accepts that it is unlike other short term lenders. Managing Director, Jonathan Rubins, described his first meeting with the bridging finance trade body, the Association of Short Term Lenders, (astl), as an “eye opener”, realising just how different their business model is, compared to their contemporaries.

“I outlined what we did and the other lenders all looked at me as if I was mad – but then they told me what they did and I looked at them as if they were mental,” he recalls.

So why the unconventional route?

According to Jonathan, ABC are property lenders that prefer to deal with property-minded professionals. “It’s just straight-forward, black and white, asset-minded lending based on numbers,” Jonathan reveals, banging his hand emphatically on the table in the firm’s sleek offices in Finchley.

With a relatively small team of 10 in the office, doing little deals often does not interest the company, they may complete fewer loans than other lenders but their average loan size is larger, standing tall at £600,000 – well above the industry average. ABC admits that it rarely extends finance under £150,000 as smaller deals can tend to be more work, with less sophisticated borrowers facing more difficult circumstances.

That’s not to say that dealing solely in commercial markets is all smooth sailing – what about when commercial property values dropped off a cliff and banks became scared of their own shadows?

“We went through a horrendous period.” Jonathan admits, “We’ve survived it and it has brought us new opportunities but it really was an era-changing event. People we’d known and worked with for years suddenly disappeared; we had never seen anything as aggressive as this. I think everyone will say that even the recession of ’91 was nothing compared to this.”

He tells a story that on the day that the investment bank Lehman Brothers collapsed, sixteen large houses in St John’s Wood came on the market suddenly. Calling this “unheard of”, he says: “It’s scary to think that the value of your stock is plummeting through the floor.”

Fortunately, ABC were not involved in this particular deal, neither were they too exposed to the full horrors of 2008, they hadn’t dipped their fiscal feet in development lending, they hadn’t lent on shopping malls and town centre projects and made it through the worst – although the commercial markets are still far from a return to golden years.

“We’ll be bumping along the bottom for a long period of time,” Jonathan predicts, “there are still low transactional levels, auctions are exceptionally quiet and there is still a certain nervousness about property that hasn’t disappeared yet.”

However, Jonathan is hopeful about the future of bridging finance. He speaks of a new generation of younger lenders, who have left behind the reputation of backdoor lending and dodgy characters that once dominated the sector.

He does, though, issue a word of warning to those commercial-phobic lenders: “There are now a lot more bridging firms out there, and they’re all fighting over a very small part of the market (residential chain breakers). Competition will take on new levels before long.”

As for ABC, they see their competition coming from the clearing banks rather than their fellow astl members and with predictions that banks will not enter the market “in a meaningful way” for at least a year, they’ll carry on with what they know best, specialising in commercial loans and auction finance. Despite talk of subdued activity, last month they completed a loan of £3.5 million and say that the appetite to lend is still very much there.

“Brokers often think that we’re snobby,” Jonathan muses. “We’re not snobby, but we do have very specific requirements. However, we also have two business development managers who are always on hand to listen to brokers and we’re open for business, so keep calling.”

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