Aldermore's development re-launch update

Aldermore's development re-launch update

Since re-launching its development offering last year, Aldermore has provided indications of support for over 300 enquiries from brokers keen to make the most of the bank's.

Since re-launching its development offering last year, Aldermore has provided indications of support for over 300 enquiries from brokers keen to make the most of the bank’s reinvigorated product.

We spoke to Peter Owen, Head of Property Development Lending at Aldermore, to find out more about how the product re-launch had gone and what further developments might be on the horizon…

B&C: How competitive have you found the development sector to be?

PO: We acknowledge that there are a number of established and well-respected competitors in the London and South East marketplace, providing us with healthy competition for business. The picture is more fragmented across other parts of England and Wales, where often there is much less competition for business. We firmly believe that our accessible experts in the sector, combined with our flexible approach to schemes, help us have the edge.

How well has your own product been received?

In 2012 we issued nearly £65 million of offers from start-up, the vast majority of which will result in good written business for Aldermore. We are also very much open for business this year, and have plans to write considerably more new property development business in 2013.

What do your customers value most about the service that Aldermore offers?

We have experienced managers and good lenders, many of whom have operated in the property development market place for many years and who take an active and thorough interest in the borrower’s business plans. We also have a very experienced back room operation and provide a first class, ‘hands on’ service proposition from initial heads of terms through to completion.

What benefits do developers have when submitting development deals to a challenger bank as opposed to a mainstream bank?

Of the challenger banks (using the widest definition available), Aldermore is currently the only player that is ‘banging the drum’ and marketing themselves as being keen to lend more in the residential property development market. Our USPs are an ability to provide a speedy response, to lend further afield across England and Wales (and not just in selective London and south east post codes), to fund a loan exit onto a long term investment loan and, both overall and in summary, to provide the borrower with a great service proposition.

Are there any plans to expand the product to include commercial developments?

We are happy to look at mixed use schemes and standalone commercial schemes where there is a pre let to a strong tenant covenant.

What additional features would you like to be able to implement in the near future?

We would like to lend more to bigger and more established regional house builders, and welcome opportunities to enter into discussions with such operators about widening our reach to this important market place.

Have you come across any particularly interesting or innovative developments that were challenging to consider?

Yes, we have lent to a number of different borrowers across a wide range and – though they provide the lion’s share of the business we have written - not just to the more conventional, house-builder borrower. For example, we have lent to borrowers developing single asset, 8-9000 square foot properties in Surrey and to others building 30-unit, cliff-top seaside apartment blocks.

What do you find is the biggest barrier to a development deal being able to progress?

It’s often the lack of detailed planning consent for a scheme that delays progress. The key barriers to progress, however, have tended to be the lack of sufficient cash that a borrower can bring to the scheme or a borrower’s lack of experience. We can often find ways to circumvent the lack of cash - by, for example, restructuring the deal with the involvement of a mezzanine provider providing additional input - but a lack of experience will often be an insurmountable barrier.

What is your forecast for the development market over the coming 12 months? What do you foresee to be the biggest challenges?

Firstly, on the positive side, there will be more and more ‘stalled’ schemes that find their way through planning committees this year and provide opportunities for banks such as Aldermore. There will also be more and more WIP-loans that are exited by the bigger banks which will need to find a home for funding elsewhere, again providing useful opportunities.

On the less positive side, continued UK macro-economic uncertainties, including the spectre of a ‘triple dip’ recession, and further pressures on the construction sector as a whole will have to be carefully handled.

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