Lloyds slammed for pulling the plug on property developer

Lloyds slammed for pulling the plug on property developer



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A number of high profile property developers in Scotland have blasted Lloyds Banking Group for supposedly causing the collapse of another property group.

Land development firm, Elphinstone Estates, called in administrators KPMG earlier this month after Lloyds said there was no other option, having reportedly pulled an estimated £175 million of funding.

Scottish news site, Scotsman.com, said that the £175 million, a combination of debt and equity, was pulled after Elphinstone failed to agree on terms with Lloyds.

The bank has said the ‘severity of cash flow problems’ at the group meant that it couldn’t continue.

Elphinstone Estates – which was started up in the 1990s by one of Scotland’s top businessmen, Ken Ross – is the third property developer in Scotland to fold following disputes over funding with Lloyds.

Last year the firms Kenmore and Kilmartin

were both put into administration, having been funded by the Bank of Scotland, now part of Lloyds Banking Group.

David Hunter, a property fund manager, told the Scotsman newspaper that Lloyds’ short term approach to property developers’ lending problems was “in danger of destroying the Scottish property industry”.

Ken Ross, chairman of Elphinstone, added in a statement yesterday: “A re-financing package had been developed with another funder, and we were trying to reach an agreement with Lloyds Banking Group that would have enabled the business to move on. Regrettably LBG was unable to provide continuing support.”

The Giffnock-based company began as a house builder, before moving into property redevelopment. Its 18 strategic land sites, and properties totalling a size of 800 acres, will now be sold off to pay back creditors.

Its cash flow problems have been blamed on a combination of a decline in new construction projects and the fall in land values.

Development lender and expert James Bloom of

Regentsmead

said that this scenario is ‘typical’ of the banking attitudes seen over the last two to three years.

He said: “There are many viable businesses which have gone under due to the short term and often short sighted view of mainstream lending institutions.

“Mainstream lenders often find it very hard to find the middle ground, they are often either lending irresponsibly with LTV’s seen of up to 120% at the height of the market or they are not even able to lend at very low LTV’s even on secure projects.

“In our business we have seen cases as low as 10% LTV having been turned down by a mainstream lender purely because the lending book was full of problem cases caused by the over lending in the heady days of the booming market.”

He added: “Unfortunately it is unlimitedly the small business who suffers from this attitude with many sound, viable businesses struggling to meet their normal commitments because of past mistakes made which have nothing to do with them or their business.

“No one condones the

extreme measures taken recently in Devon where a disgruntled developer bricked up a branch of a well known mainstream lender

but maybe he was just re-enforcing the message that despite what they say they are well and truly closed for business!”

A spokesman for Lloyds has insisted that putting its customers into administration was “always a last resort”.

He said: “We have explored every available avenue as this business has sought to address its funding issues. Regrettably no viable solution was identified, resulting in the directors of the business requesting the appointment of administrators.”

 

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