On Friday 3rd July specialist lender Dragonfly Property Finance gathered a number of intermediaries at Edgbaston Stadium to discuss commercial finance and how brokers – who make up 99% of the lender’s introductions - can tap into earning opportunities within this burgeoning sector.
Although Dragonfly started its lending life as a bridging financier, its products now span residential, development, buy-to-let, second charge and commercial offerings.
The focus of this event was on commercial finance and Dragonfly’s criteria and appetite to lend in this part of the market, despite the lender being incorrectly perceived as what Regional BDM Daniel Parry calls “London-centric”.
Daniel’s role is to focus on business development in the Midlands and the North of England, and he’s seeing plenty of deals in these parts of the country.
Ludo Mackenzie, Head of Commercial Property at Dragonfly and a qualified chartered surveyor, laid out the lender’s vital stats by way of a bit of background and introduction to the focus group-style session.
Since launch in 2009, Dragonfly’s total lending figure is approaching £1.5bn and its loan book is in excess of £550m today.
According to Ludo, the lender has never lost a penny to date on commercial.
The team is 27-strong and the lender expanded into Holborn offices in Central London in December last year.
Dragonfly has a dedicated Commercial Real Estate Debt Fund, raised in October 2014, totalling £130m and Ludo explained a bit more about the fund and its aim:
“We went out and raised [this money] from a big family office group and UK pension funds.
“With the amount of recycling that tends to go on, we have a 3-year period for Fund 1, to deploy that money, so when you gross it up…it’s probably £350m of commercial lending that we need to do over this period.”
Dragonfly’s two commercial products, bridging and term, can be broken down into the following basics (for specifics and more detail, please see the Dragonfly product matrix):
Bridging:
- Up to 2 years
- 1.5% – 2.5% proc fee
- 2% arrangement fee
- 0.95% - 1.2% interest rate
- Up to 70% LTV
- No ERCs
Term Loan:
- 3-year product
- From 1.5% proc fee
- 3% arrangement fee
- 9.99% per annum interest rate (with option to defer)
- Up to 70% LTV
- ERCs apply
Through a series of case studies, Ludo evidenced that Dragonfly will look at the vast majority of asset classes in commercial, including offices, retail, pubs, hotels and industrial.
When it comes to commercial lending, the ‘story’ is important: what is the borrower’s business track record like, how performant are surrounding businesses of a similar type, does this business have potential to be alive and kicking in three years’ time?
And, most importantly, how certain is the exit?
The lender takes a positive view on assets with residential planning – up to 70% LTV - or permitted development schemes, effectively lending on a value greater than that of the actual security, taking the prospective permitted development into account.
Whilst keen to differentiate themselves from the traditional banking mentality, fiduciary duties to investors, FCA regulation (Dragonfly obtained authorisation in 2012) and care taken with the funding that Dragonfly has in place means that there are certain similarities.
“We are as thorough as a bank, we’ll ask all the same questions, the KYC will be the same. We just do it faster,” says Ludo.
In turn, this means that Dragonfly’s approach to risk is measured and there are certain things that cannot be circumvented - uncertain planning permissions or not being able to fulfil a director’s KYC, for example.
Talking speed, the benchmark for an assessment of the facts and a resulting DIP is 24 hours and this is based on the collective agreement between all relevant parties: BDM/sales, Matt Smith, Head of Credit, and Jonathan Samuels, Dragonfly CEO. Crucially, this means that all introducers receive a solid, credit-backed yes or a quick no.
Discussions carried on into the evening over a beer, burger and a spot of bat and ball, as the Birmingham Bears took on Derbyshire, winning by 60 runs.
Attributed to Dragonfly
On Friday 3rd July specialist lender Dragonfly Property Finance gathered a number of intermediaries at Edgbaston Stadium to discuss commercial finance.
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