Bridging & Commercial Magazine — The Sustainability Issue

ISSUE 17 SEPT/OCT 2021

+ Aspen set to take on bridge-to-let market p20

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Acknowledgments Editor-in-chief Beth Fisher beth@medianett.co.uk Creative direction Beth Fisher Caron Schreuder Sub editor Andrea Johnson Reporter Andreea Dulgheru Illustration Valf Sales and marketing Caron Schreuder caron@medianett.co.uk Special thanks Stuart Macdonald, See Media Jack Izzard, Rhizome Media Group Finian McCann, LSBU Matt Wells, M Public Relations Sophia Samaras, Engine MHP James Morgan, Aviva Investors Rachel Hall, MSP Capital Cassie Moyse, Bradley Hall Richard Wojcik, Maslow Capital Laura Gibson, Calvermont Tiba Raja, MFS Printing The Magazine Printing Company Design and image editing Russ Thirkettle, Carbide Finger Ltd Bridging & Commercial Magazine is published by Medianett Ltd Managing director Caron Schreuder caron@medianett.co.uk 3rd Floor, 71 Gloucester Place London W1U 8JW 0203 818 0160 Follow us:Twitter @BandCNews | Instagram @BridgingCommercialMagazine

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ecently, our conversations and focus have been on the three p’s: pandemic, pingdemic and petroldemic. However, the biggest catastrophe we all face, which has been looming on the horizon for decades, is the climate crisis. Scientists have been banging the drum about its effects for years, yet only now businesses in our sector are starting to consider and vocalise their ESG plans.

However, the long-awaited COP26 summit is just around the corner, and we can expect a series of announcements that will lead to major changes—in our industry and everyday lives. Most discerning people have thought about how they, individually, contribute to the crisis, and what steps they can take to limit this. I for one avoid fast fashion where possible, opt for eco-packaged, locally created products, and live a vegan lifestyle (check out p72 for my restaurant recommendations).

However, a siloed approach will not enact the drastic improvements we need.

When I started researching for The Sustainability Issue, I quickly realised the staggering impact of built environment and how my role as a journalist could spread awareness and encourage changes in this high carbonemitting sector—much more so than whether or not I use a plastic straw.

Unpredictable weather will significantly impact livelihoods and homes—and the latter is something the property market has to get a handle on, and quickly. This is why I took a very deep dive into how far away industry is from a green industrial revolution [p32]. Spoiler alert: we’re pretty far. Hopefully our experts’ top tips and advice will push more companies to make sustainable housebuilding the priority it needs to be.

Elsewhere, we speak to Uplift Finance about how being ethical and commercial don’t have to be mutually exclusive [p14]; find out what six other countries are doing to make building greener [p48]; and quiz Stonewater’s John Bruton on what its £250m sustainability bond will bring to the affordable housing market [p62].

While this issue of the magazine is eye-opening in terms of how slow take up has been so far in terms of sustainability, there are signs that businesses are working hard behind the scenes to solve some of the challenges.

For example, development lender Atelier exclusively revealed to Bridging & Commercial that it will soon be piloting a £25m initiative that could save green-minded developers six figures on their loans [p54]. While the lender will be bearing the price reduction at this stage, its learnings will pave the way for a much more lucrative and climatefriendly future—something all companies in the specialist finance arena should take note of. In the words of its co-founder Chris Gardner: “If you want to run a lending business, you need to understand this stuff or you’re dead. This is survival.”

Beth Fisher Editor-in-chief

3 Sept/Oct 2021

8 10 20 28 32 48 54 66 72 74 It can’t be like financial veganism; this isn’t something that’s on the periphery” p54 4 Bridging & Commercial

Products News Exclusive Zeitgeist Cover story View Feature B&C Awards Limelight Series

They’re going green

Shawbrook Bank / Uplift Finance

How to sustainably move into bridge-to-let

Why a four-day working week is out of the question

We are 40% of the problem

Looking further afield for inspiration

Atelier / Stonewater

Go vegan!

It’s not just about profit

The biggest bash since Covid struck

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s part of its strategy to reduce carbon emissions, the government is looking to kick things up a notch with proposed plans to raise the minimum EPC rating of domestic private rented properties to C by 2025 for new tenancies and by 2028 for existing ones. While this is a positive step towards the UK’s goal to reach net zero by 2050, it is also a chequered flag signalling the start of the upgrade race for BTL investors. While the proposed laws stipulate that landlords who do not meet the rating could be subject to steep fines (calculated on monthly rent) with a cap of £30,000 per property, Emma believes the biggest punishment they face is not being able to rent their homes at all.

This risk is driven by a few factors. On the one hand, the government is pushing to ban letting agents and online platforms from advertising or renting properties that breach the PRS regulations, and for the introduction of an independent regulator to monitor this. This means that landlords who haven’t brought their properties up to at least a C rating by the deadline could see their revenue stream go down the drain. “Putting off making changes could mean their property can no longer be rented out, leading to void periods while the work is done,” says Emma. Based on the average loan terms for home improvement deals that Shawbrook is seeing, BTL landlords could lose between six and nine months’ worth of rent while the upgrades are carried out—or even more depending on the breadth of works required and the current issues surrounding materials and skills shortages.

Additionally, we have what Emma calls ‘the rise of the conscious tenant’—the increasing number of renters who are seeking out energy-efficient homes. “In popular locations, tenants will usually look for the best value for money, but broader elements will be taken into account when faced with two similar properties—and cheaper energy bills could make all the difference,” she explains. According to a Savills survey from August 2020, 49% of people looking to buy say that green credentials have become more important.

Another reason why landlords should consider renovating their properties—which may not be as obvious, but will likely play a big part in making the housing market more sustainable—is meeting lenders’ requirements for finance. Emma anticipates that, as we move closer to the 2025 deadline, borrowers will be increasingly questioned about their plans and intentions for properties that necessitate EPC rating improvements. Particularly for those looking at longer-term products or deals, she predicts that finance providers may stipulate a level of work be committed to within a short timeframe in order to offer the loan. The landlords or investors whose properties have a higher EPC rating—considered ‘less risky’ assets—will likely be in a more favourable position regarding the rates they have access to in the immediate term.

Of course, when it comes to boosting energy efficiency, the main thing that deters landlords from taking action is the expense involved.

According to CBRE analysis from March 2020, it would cost around £680 to improve a D-rated home to a C. However, depending on the extent and type of works required, that figure could soar into the thousands, especially if upgrading from a lower rating. Big undertakings, such as insulating an entire home, could see landlords forking out up to £2,700 for room-in-roof insulation, £6,000 for solid floor works, and £14,000 for internal or external wall insulation.

Heating, a substantial factor in all of this, also comes at a hefty price, rising to £1,800 for high heat retention storage heaters, £6,000 for solar water heating, and between £3,300 and £6,500 for double-glazed windows. Meanwhile, cheaper measures, such as using low-energy lighting or draughtproofing, may only run between £20 and £120.

“For landlords, the immediate costs of carrying out any work may feel steep, especially if you need to replace a full heating system or a roof,” says Emma. “In this case, it’s better to look at the advantages 10 Bridging & Commercial

and savings over the long term, as well as improving the property.”

However, it might be hard to pinpoint exactly how much these measures can save tenants and landlords overall, as each property’s energy usage will differ, even if two have the same EPC rating.

CBRE estimates a £305 reduction a year on energy bills and an 80% cut in emissions for properties going from a D rating to a C. Landlords which upgrade from the current minimum EPC rating of E to C will see the running cost per square metre halve from £16 to £8. For E-rated properties, just the installation of roofin-room insulation alone could bring savings of £837 per year.

Emma feels the new legislation around energy efficiency has been a wake-up call for some landlords; Shawbrook has seen more clients engaging in the conversation about making green home improvements and taking a longer-term approach to their properties. “The savvy landlord is already thinking about their investment strategy—whether that is making changes to their portfolio sooner rather than later, or deciding that they will only buy already compliant C-rated or above properties moving forward.”

She also thinks the current consultation papers are just the beginning of new regulations to make the UK property market more ecologically sound—and the quicker landlords get ready for any eventuality, the better. While it is difficult to predict which laws they should prepare for now, she advises that landlords should aim to achieve a minimum EPC rating of B in order to put them in a strong position ahead of any changes.

“While the consequences of inaction are significant, there are many landlords who are yet to realise the level of work they may need to carry out in order to keep gaining an income from their properties,” Emma notes. This is where, in her opinion, the lenders and brokers come in. She believes that finance providers have a big role to play in helping landlords both to understand the new legislation and to take action.

“It’s important for brokers and lenders to recognise that making changes will be easier for some than others—and lenders will need to

LANDLORDS URGED TO UPGRADE OR BE LEFT BEHIND Words by

andreea dulgheru It is crucial for brokers and their landlord clients to be prepared before any new laws around EPC rating requirements for the PRS take effect. Emma Cox, sales director for property finance at Shawbrook Bank, explains the significance of this shift and why being proactive for any eventuality will help both keep gaining an income start offering products that support and incentivise landlords who may be reluctant to make changes or simply don’t know where to start,” she expands. “Doing what is best to improve the level of housing stock generally and getting properties up to the necessary environmental standards may result in some tough calls and bold moves, but lenders have an overarching responsibility to the market and their clients.”

This is why Shawbrook has plans to go several steps further by launching new energy-efficient mortgage products in the coming months to support landlords making the necessary improvements to their properties, as well as incentivise them to do so.

Helping landlords choose the right company structure Emily Machin, Head of Specialist Finance, InterBay Commercial The choice facing landlords

Limited company ownership

Purchasing a new buy to let property, whether it’s as a first-time investor or as an experienced landlord can be a huge undertaking.

According to the latest BVA BDRC research1, 51% of all landlords say they intend to purchase their next rental property within a limited company structure – a figure that increases to 67% for landlords with 11 or more properties – and it’s now the most preferred purchase route for investors looking to buy a new property.

As well as raising funds for the initial capital outlay, there are other costs such as mortgage payments, repair costs and upkeep to take into account.

On top of all that there’s also decisions over the best way to manage the investment and what sort of structure to set it up as. Is it better to run a buy to let business as a private landlord, with a spouse or partner, or as a limited company?

In this article, I’ll be exploring the different options available to landlords and looking at the pros and cons of each type of structure. Before I begin, though, I can’t emphasise strongly enough the importance of encouraging your clients to speak with a suitably qualified tax adviser and seek legal advice before entering into any arrangement.

Individual, joint or limited company ownership?

Private ownership For years, the most popular way to run a buy to let business was as a private landlord. With the promise of rental income and capital growth, purchasing and managing rental properties as an individual had always been the most straightforward way for investors to look after their portfolios.

However, the phasing out of mortgage interest tax relief, as well as a raft of other changes to taxation and legislation, has seen growing numbers of ‘casual’ landlords exiting the sector and being replaced by a more professional class.

Joint property ownership Whether the buy to let property is an investment with a spouse or business partner, it’s essential that investors choose the right type of joint ownership that best reflects their situation. Joint ownership can be set up as either ‘joint tenants’ or ‘tenants in common’ and understanding the differences between them is key.

Joint tenants • Each owner has equal rights to the whole property.

• If one owner dies, property ownership automatically goes to the surviving partner.

• For the property to be sold, both owners must agree to the sale and any proceeds from the sale are split equally.

Reasons why landlords might consider running their buy to let business as a limited company: • The reduction in mortgage interest tax relief doesn’t affect limited company landlords. It means those choosing to incorporate can offset all of their mortgage interest against profits from their rental income.

• Profits are subject to Corporation Tax which currently stands at 19%. This is lower than the 20% basic rate of income tax, the 40% higher rate and the 45% additional rate.

• Limited company applications are stressed tested at an ICR of 125% - less than the 145% ICR most lenders apply to individual landlord applications.

However, landlords thinking of transferring properties across from individual or joint ownership to a limited company should be aware that it could incur considerable costs. As the properties must be legally ‘sold’, the move will be seen as a purchase and could incur Stamp Duty, Capital Gains Tax and early repayment charges. As mentioned earlier, clients should always speak with a suitably qualified tax adviser and take legal advice before acting.

How InterBay Commercial can help Whichever structure your client chooses, InterBay Commercial is ideally placed to help them find the right buy to let mortgage. Our range can support a variety of property types, including converted and purpose-built houses in multiple occupation (HMOs) and multi-unit freehold blocks (MUFBs), and with up to 80% LTV and interest-only options available, we could have the solution they need.

• Owners cannot pass on their share of the property in their will.

Tenants in common • Ownership doesn’t have to be split 50:50, borrowers can own differing shares of the property.

• Property ownership doesn’t automatically switch to the remaining owner if one joint owner dies.

• Once both owners agree to sell the property, the proceeds are split depending on the number of shares each owner has.

• Joint owners can pass on ownership of the property in their will.

Sources: 1 BVA BDRC Landlords Panel Report Q2 2021 (slide 55)

To find out more about how InterBay Commercial could help, speak with a member of our sales team, visit interbay.co.uk or call 01634 835006.

FOR INTERMEDIARIES ONLY

For your buy to let cases: 1. Experience with complex proposals and ownership structures 2. No limit on number of bedrooms/units for HMOs/MUFBs 3. Single loan for multiple properties 4. No maximum portfolio size

InterBay it.

Using our expertise and detailed understanding of the market, we’re determined to support bespoke solutions for your landlord clients.

So the next time you’re facing a challenging buy to let case... InterBay it.

Speak to your specialist finance account manager today or visit interbay.co.uk for more information.

FOR INTERMEDIARIES ONLY Product and criteria information correct at time of print (20.09.2021)

Taking three steps forward WORDS BY CARON SCHREUDER

“Being ethical and being commercial can be the same thing,” proclaims Edward Clark, managing director at brokerage Uplift Finance.

I am talking to him and operations manager Tom Hovers about why support from the broking and lending communities in upping the sector’s green credentials is so stunted

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after Uplift’s pipeline disappeared in the wake of Covid.

Niche number one for the pair is co-living, which I am told is almost finished and “ready to scale”. I suppress a groan, as I have several biased, predominantly unfounded views about this asset class, a solid argument in favour of I have yet to hear.

However, if it is indeed here to stay (due to 30-somethings not being able to get on the unattainable property ladder or seeking more of a social slant to their living situation), why not raise standards across shared accommodation and make landlords wealthy by keeping tenants happy and connected to their environment? “Seems like progress,” Edward persuades. “You get messed around a lot by landlords,” he continues, relating closely to my own experience. “Financially and economically, we’re trying to tie the incentives of the tenant to those of the landlord, rather than having this conflict.” Co-living, in Edward’s view, can be seen as a means to eradicating low-end HMOs and improving rented accommodation at that end of the market.

He details that the distinction between HMOs and co-living is key when it comes to getting buy-in from financiers and investors. “There’s a different quality, and it’s a completely different investment strategy. Even though it looks very similar, the amount of money you’ve got to put into a co-living property can be 50-100% greater than what goes into the refurb cost of a bog-standard HMO.” He understands that co-living can be a ‘fluffy’ word, something he is trying to change. Uplift intends to widen the amount of investors in the co-living space by collaborating with a tech company that can supply co-living property management data that evidences the heightened quality and low arrears rates. “We’ll be able to statistically demonstrate that this is a different investment class,” says Edward, “and that’s the language that the risk analysts speak.”

I ask about the link between co-living and sustainability.

According to Edward, co-living leans more to sustaining humans than the environment. However, as this is a relatively new, tenant-driven market, I conclude that energy efficiency, smarter methods of consumption and disposal, as well as proximity to amenities and transport come with the territory—all factors that are indeed shades of green.

Uplift Modular (name TBC, set to launch in February 2022) captures the second division that Edward and Tom are establishing, specifically focused on sourcing funding that will cover developers’ deposits. The well-publicised upsides to modern methods of construction (MMC)—such as being more eco-friendly, quicker to complete, and nicer to live in— mean that there are now mortgages and changes to planning to support this type of project. However, this area remains “artificially compressed by the lack of financing,” Edward claims.

hat gets me out of bed is solving problems,” says Edward, and that is exactly what the impending evolution of Uplift aims to do.

The development finance specialist has embarked on a mission into several specific niches by developing new Uplift sub-brands, each of which solves—or at least seeks to remedy an aspect of—an issue faced by the market. What connects the focus areas is a core commitment to sustainability.

Edward considers the general sluggishness to transform a result of late-stage businesses run by “orderly and risk averse” people making gradual improvement. “This works well in stable periods but, right now, we are in a time of exponentially accelerated change, similar to that experienced in the industrial revolution,” he states. “Adaptability will be key over the first half of this century. For reference, see 2020.”

Launched in 2019, Uplift—which gets its name from the finance-specific definition ‘increase in value’ and, according to Edward, alludes to “the positive, holistic connotation of improving wellbeing”—is fortunate to still be in a phase when turning in a greener direction is fairly easy to do.

The marked shift in consumer attitudes towards the intrinsic feel-good factor, with choices being driven more by strongly held values (which intensified during the pandemic), means there is much to capitalise on as a company in any industry, Edward believes. The word capitalise is deliberate, as Uplift is going after the “pot of gold” that lies at the end of each of its chosen rainbows.

I ask for his views on the construction sector’s impact on climate change. “We were talking about this 10 years ago. Why hasn’t the conversation moved? What new information has come out since? We haven’t learnt a thing,” Edward laments. “It’s frustratingly uncreative to see that there’s a problem and loads of profit to be made from solving it.”

He favours a market-driven approach to advancing the agenda, as opposed to a government-led one, which he believes makes way for more commercial opportunities. “I think that whenever government tries to draw a red line, it works a little bit, but the definitions of that line will move and have corporate interests involved, sooner or later.”

Before diving into the specifics of the sub-brands, Edward apologises for talking over Tom (who is yet to say a word), explaining that this is common. He is the ‘ideas guy’, whereas Tom has real-world experience in supplying modular components in the nuclear industry, and his passion comes from delivering the concepts that Edward dreams up. “That’s why the balance works well. I’m the technical, analyst finance geek, and Tom actually understands the reality of it.” Edward credits him with “saving his bacon” when he came on board last summer 15

Sept/Oct 2021

Edward Clark

News Tom Hovers

identify a good (or bad) product when they see it. But with Tom’s experience in handling the purchase, delivery and audit of components in the energy and defence sectors, Uplift can add value as a broker, too. “It’s part of the package to review the supply chain risk and any quality control procedures,” he confirms. Tom’s experience in the nuclear industry means that he has got a feel for what can go wrong and when. “Often, it’s the obvious things, such as whether there is enough space to fit a piece into place, or whether we need to remove those trees etc,” Tom adds. “You can get lost in the technical complexity and caught out by simple elements of the real world. Nuclear helped; the stakes were high so you had no option to screw up.

That’s the case with modular property, too—mistakes tend to be big.” Lenders may also review sites that have already gone up, visit factories and require certifications—such as BOPAS and ISO quality adherence—as part of their due diligence.

Vesting certificates are an additional means by which lenders and lawyers are getting comfortable with helping these borrowers, but Edward is sceptical. “A vesting certificate gives a lender ownership of the materials they have sent deposit cash flows for,” he details. “For example, if you have a timber-framed modular build, the deposit is going to be used to buy wood. Should something go wrong, the lender

“We need to sort out deposit cashflows for modular,” he expresses. “Not many developers are going to agree to send 40% of build costs in advance to a manufacturer, in addition to everything else they’re spending, and so traditional build gets favoured.” But he considers this a solvable problem, citing that Europe has managed to do it, and similar industries such as ship and aeroplane building can also be learned from.

Excitingly, the brokerage has already made inroads with a small number of lenders, with which it is co-designing products that serve this space. Edward shares that they are all in the challenger bank arena and are funding these loans on a case-bycase basis. “Interest rates average around 8-9% (for the entire development), but the build is approximately 40% quicker.”

This shortened term time means their exposure to the market is contracted in any one deal, and the funds are fully drawn down and earn interest immediately. “Their systemic risk is shorter and compounded return is higher.”

On top of this, schemes that score higher on the eco scale may also have a better chance of obtaining planning.

I ask Edward to break down the ways in which a lender might become confident in working with a modular product and manufacturer. He says that, at the outset, it helps to be working with a finance provider that has the expertise to 17

Sept/Oct 2021

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can claim that wood as an asset. My concern is that once this happens a few times, lenders won’t have much desire to resell or hold those assets and it won’t be scalable.”

Scalability is vital for modular if it is to become an open market. Looking at lenders that have their own manufacturing arm, Edward does not consider this to be a route to encouraging competition. “We’d like to be able to get it to the point where someone who wants to build two or three houses can go to any of the reputable modular manufacturers and there’s a bank that will finance that.”

Tom is realistic about how long this may take to feed into the mainstream. There are supply chain risks that many lenders just aren’t set up to manage. Plus, it’s only sustainable if every part of the process follows suit. “How does that first bit of metal come onto the shop floor? Where does it get cut? What machine is it going onto? How is it being packed and stored?

“Ultimately, you need the security of being able to deliver and build the thing, otherwise it remains a grand idea, an architect’s drawing—and that’s why most eco builds become nothing more than a nice picture on a website,” he asserts.

The lead times for projects of this kind are long—up to three years in some cases. Uplift is involving architects (which happen to be a critical source of leads for the firm) at the very start, then comes the planning and build process. Materials and labour shortages—mostly Brexit related—have heavily impacted delivery. “We were going to import from Germany, then the pound depreciated by a quarter, and that was our profit margin, so we had to stop.” For now, manufacturers used are UK-based, but the team has a plan in the works for importing.

The third target for the brokerage, which Edward says is

a bit of a longer play and further down the line, is tackling the nitrate neutrality problem affecting thousands of builds in the UK. Bridging & Commercial wrote about this possible ‘canary in a coal mine’ back in December 2019, which is what piqued Edward’s interest in the matter. Although plans are in their nascency, Edward reveals that Uplift has commissioned a couple of studies in conjunction with a university, and a potential solution has been found: a water filter. “I can’t say a lot, because it’s literally in the initial stages.

We’ve got six, probably 12 months, of R&D, and that’s a bit of a hail Mary. It may come to absolutely nothing, but it’s worth tackling given the potentially enormous upsides.”

As these are two people who clearly spend a large amount of their time figuring out ways to do ‘good’ for the planet, I want to bring our conversation to a close by getting their views on where we go from here. “What the past 18 months have shown is just what systemic risk is like,” Edward muses.

“When you’re in business, you’re often quite blinkered, focusing on the day-to-day, and we’re very fortunate to live in a developed society where we don’t have to deal with a lot of systemic risk.” He lays forth an interesting concept: our lack of necessity has led to slow progress. Modular housebuilding, for example, is flourishing in countries where they have had little choice but to adapt. “But think about what’s could hit over the next 10 years: huge economic structural shifts brought about by climate change and its geopolitical fallout; food production decreasing in certain regions; unexpected migration patterns; and potential conflict over resources. It’s about as macro as you get and will force innovators to work at pace—with serious consequences if they get it wrong.”

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Aspen set to take on bridge-to-let market Words by

BETH FISHER

Following steady growth since its launch in 2017, Aspen Bridging is embarking on a major transition into the second stage of its business plan. As part of this, it will be increasing its market share in the short-term lending space and entering the bridge-tolet sector with a pilot phase from October and a planned launch to the wider market in 2022

Exclusive

The bridging lender has certainly made its mark during its first four years of trading, having initially edged towards the higher end of leverage with LTVs north of 75%; catering for the foreign borrower market, where circa 30% of its business derives from; and introducing stepped rates at 0.39% for six months and 10-day completions.

Its director, Jack Coombs, believes the stepped approach incentivises the borrower

to exit early and this, combined with steady improvements in book quality since launch, has seen its average term across the entire book from launch go from 12 months to eight. He attributes this shift to being recognised as a more established and credible lender in the space and attracting higher quality borrowers over the past 18 months when other lenders halted new business.

While it still offers higher LTVs within

its proposition, the company’s focus is predominantly on providing better service and competitive rates in the 6075% LTV zone to property professionals and investors. In support of this, Aspen recently launched a September special, offering flat rates of 0.64% at 70% LTV, which Jack reveals is now being made permanent.

2020 was the year that saw Aspen’s greatest transformation—and, harmoniously, its

Exclusive

“We are striving to increase new deal volumes by 40% next year”

highest number of completions prior to 2021.When the pandemic struck, the lender was quick to react and proact. It promptly utilised remote legals and valuations and was back to offering 75% LTV as early as May. In the following months, the specialist provider noticed that short-term finance completion times across the industry had hit the brakes, inspiring it to bring out a rapid desktop valuation offering. Next came the launch of its no-valuation residential bridging product, which is available to UK and overseas borrowers, either individuals or corporates, at up to 70% LTV for loans between £400,000 and £1.5m, with rates from 0.74%. This relies on an internal assessment, rather than a physical valuation and the associated fees, to help when speed is of the essence. Consequently, it can give its clients a firmed-up offer within 48 hours and completions within 10 working days. On top of this, the team meets every customer, something the lender has done since day one.

Innovation continued into 2021. Early this year, Aspen went through the arduous process of becoming CBILS-accredited by the British Business Bank, with an allocation of £40m to play its part in supporting borrowers. It went on to post its best month of lending in April at £23m and, in Q2, lent a record £51.3m. “The advent of CBILS and our repositioning in the market as a leading competitor on rate, to supplement our strong service, has seen a surge in deal

volumes,” shares Jack. So much so that yearto-date completions for 2021 are up by 80% on 2020 figures.

To remain on this growth arc, Jack divulges that Aspen has upped its maximum loan size to £10m net and can offer 75% LTV up to £5m net. “What we’re looking to do in 2022 is notably outstrip the lending levels that we aim to achieve this year,” he adds. “We are striving to increase new deal volumes by 40% next year.”

The lender is self-funded through its parent company S&U—a majority family-owned FTSE-listed firm with £300m of equity— something that Jack says has enabled it to be creative and innovative over the past 18 months. “We don’t have a funding line breathing down our neck saying, ‘If this box doesn’t get ticked, the loan cannot complete.’”

The way it is capitalised also facilitates a smoother evolution into new markets. In a move to broaden its funding range and attract and retain brokers and clients, while filling a genuine gap in the market, S&U has recently approved for Aspen to pilot a bridge-to-let offering this month through a limited panel of broker partners. Once it launches to the wider market in 2022, Jack expects the new product will make up around one-third of its planned growth.

The unregulated business BTL mortgage, aimed at professional landlords, will be soft launched throughout England and Wales, offer up to 75% LTV, and have a pay rate from 4.49% per annum. Like the bridging 22

Bridging & Commercial

range, it will be accessible to foreign clients across all residential and HMO property .

“Our approach is to ensure that we perfect the product and ensure we are maintaining the right service standards before we roll it out further,” Jack says. When it is made available to more brokers next year, the finance provider will reveal its affordability and ICR calculations, and whether it will adopt top slicing.

To support its expansion into the BTL arena, the lender has recently increased its team—including appointing new head of sales Ian Miller Hawes, plus several underwriters—and now has 20 employees.

It will also be further recruiting and training up graduates, with plans to bolster its staff by around 20% over the next year. “In a post-pandemic world, there are not that many new jobs going, but we’re fortunate to be in a position where we’re a growing firm and investing heavily in technology,” Jack imparts.

Aspen’s in-house tech team has recently added two experienced developers and is hoping to introduce an API for its broker partners in 2022. This will mean that intermediaries can submit full applications “without having to key anything in”, to further reduce the process by a number of days. “The API is aimed at giving brokers the capacity to get immediate initial terms based only on data submitted by applicants without human intervention at either end,” expounds Jack. It will allow for a fully underwritten DIP without having to

Exclusive

Exclusive

manually provide details.

While the specialist lender has made a series of changes to its finance offering, I was interested to find out how it was looking to improve its mark on the environment. Jack points out that the business has already taken steps in addressing the climate crisis by financially supporting two notable Passivhaus projects—a modern construction method that achieves exemplary eco-friendly results—through its bridging offering. One of these was a £4.5m development exit loan for a private domestic project in Faversham, Kent, which went on to win the gold honour for best sustainable housing development in the WhatHouse? Awards last year.

“These deals are appraised in a similar manner by our senior team who are familiar with the build method,” explains Jack.

Aspen, which is keen to lend on more of these schemes, looks for prior Passivhaus development experience and contractors familiar with the system when assessing loans of this type.

Jack also shares that the company is considering a sustainable element to its new bridge-to-let product, especially where there’s a refurbishment aspect. “I think the green mortgages that are coming out in the term market will encourage [more Passivhaus homes],” he says, noting that improving the UK housing stock and making it more energy efficient is a green activity in itself. “In terms of rewarding people who adopt a more energy-efficient model, that’s certainly something that we’d be interested in looking into.”

He feels that the innovations being made in ground-source heat pumps will also make a difference, but will only really work well for new builds. “Where I don’t think we’re going to see that technology being adopted in a major way is in the conversion space— certainly not for older properties,” he adds.

“It’s extremely hard to make a pre-Victorian or Georgian building into something which runs off that energy source.”

Consequently, he expects to see increasing pressure to refurbish and make energyefficient upgrades, but this will not be without tension from conservation requirements. Listed buildings and properties within conservation areas will have restricted options that building owners must seek permission for. Should an 18thcentury glass window be swapped for double glazing? A balance will inevitably be struck between achieving energy efficiency and retaining the historic character of a building. With some 21% of all homes in England over 100 years old, we have a big mountain to climb.

“In a post-pandemic world, there are not that many new jobs going, but we’re fortunate to be in a position where we’re a growing firm and investing heavily in technology”

24 Bridging & Commercial

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AN IDEA WHOSE TIME HAS COME? Words by

caron schreuder

Brexit, Covid, lockdowns, fuel shortages… if ever there was a time when we needed some good news, it is now. So, when the SNP announced its plans—originally unveiled earlier in the year in its manifesto and confirmed at the party conference in September— to trial a four-day working week without loss of pay, many of us in other parts of the UK felt ourselves getting swept up in the possibility of this fantasy becoming a reality closer to home

Zeitgeist

I

decided to investigate the concept and gather opinions on what the specialist finance industry makes of the prospect of a four-day week. Is it feasible? This specific conversation (which is fairly straightforward, as we’re largely office based and needn’t consider the complexities of how it could apply to shift work, for example) can in fact be deemed shorthand for formalising a range of flexible working options that have been test-run during the pandemic.

It compels employers, unions and the government to seriously consider reengineering work patterns into ones that don’t cost us our wellbeing.

The norm of the 48-hour weekend was widely adopted only about 100 years ago. It, too, must have seemed like an outlandish idea back then. It was, in the commercial sense, in response to a lack of efficiency, unemployment and redundancy levels at the time, and with a view to boosting the economy through workers’ additional leisure time. Unsurprisingly, it had a positive impact on absenteeism and productivity, as identified by early pioneer Henry Ford (who knew a thing or two about running a successful business). Given that the UK is currently in a phase of post-pandemic economic recovery, and employment levels have dipped, allowing more time for consumer spending and opening up more variety in working hours isn’t a bad shout.

‘The Shorter Working Week: A radical and pragmatic proposal’, published in January 2019 by Autonomy, posited that “our

economy currently has the technological and productive capacity to begin to move towards a significantly shorter week immediately”. Despite a consistent increase in productivity since the 1970s, we have not made any substantial changes to standard working hours.

The report also claimed that output should not be solely the responsibility of workers, and that the UK is “lagging behind the international community in terms of its investment in robots, new ICT and labour technologies”.

of unpaid labour, such as housework or care—known as the ‘second shift’ in dual-income households. Due to these entrenched responsibilities, women are more likely than men to be in part-time roles, which offer less access to career progression. “A shorter working waged week is a necessary (if not sufficient) condition for time equality between the genders which, in turn, lays the groundwork for the possible transformation of some of these tendencies,” the Autonomy report states.

Looking at our market and the huge impact technology continues to have—ostensibly in making our roles more streamlined and efficient—why haven’t advancements of this nature translated into fewer working hours?

As this is The Sustainability Issue, you’ll be delighted to hear that the shift to working fewer days could help reduce our carbon footprint—through cutting commuting time, downsizing energysucking office space and turning to ‘softer’ activities (although the latter assumes that leisure time will be spent engaging in low- or zero-carbon goings-on). According to the Institute for Public Policy Research (IPPR) Scotland, “traditional work patterns are carbon intensive and alternative ways of organising work offer opportunities to reduce carbon consumption.” It also highlights the ‘crisis of time’ that is often brought about by long working hours, in which environmentally costly, quick-fix options are favoured when it comes to travel, meals, repairs, deliveries and more. Research indicates that a 16% reduction in UK greenhouse gas emissions could be achieved by shaving off a day’s worth of work.

Several countries have successfully rolled out schemes of the four-day week variety and proven there isn’t necessarily a positive correlation between productivity and the number of hours worked per day. In fact, excessive hours can lead to heightened fatigue and stress, resulting in an increased probability of error, accidents and time off for illness—which costs employers.

Bridging & Commercial has covered several news stories online this year about the overall decline in brokers’ mental health. Although much of the overtime and lack of sleep could be attributed to the effects of Covid and lockdowns, there is a danger that we’ve moved past the stage of coping with ‘pent-up demand’ and that burning the candle at both ends is now the expectation.

Furthermore, as diversity and inclusion are increasingly getting the attention they deserve, restructuring the working week will likely create better opportunities for those who do a disproportionate share

“A shorter working week could be one of those changes that is both great for the planet and also good for us in a way that you don’t need to be a climate scientist to understand,” writes Andre Spicer for The Guardian in his article entitled ‘Paper straws won’t save the planet—we need a four-day week.’

29 Sept/Oct 2021

Zeitgeist

The successful transition to WFH and hybrid models displayed during the UK lockdowns, and a marked change in attitudes towards work-life balance, should culminate in more openness on the subject now that we have witnessed it in action, albeit in extreme circumstances.

From my perspective, it did not result in the catastrophic lack of productivity that hitherto would have terrified the market.

Despite this, the overwhelming reaction from the specialist finance professionals who replied to my request for comment on the possibility of a four-day working week was a resounding “hell no”. This is in comparison to 64% of general businesses polled by YouGov that said they would support it—and that was pre-Covid. The same survey reported that 71% of workers believed a fourday week would make the nation happier and more productive. The IPPR findings in its ‘Changing Times: The future of working time in Scotland’ conveyed that almost nine out of 10 office-based employees support less working time.

In short: could our sector be an outlier in its views on the prospect of reduced working hours? When we internally predicted how stakeholders might respond, we laughed that the outcome would likely be a call for a six-day working week to make up for lost time during the past year and a half. It is, after all, a competitive industry known for being on-demand.

I speak first to Guy Harrington, CEO at Glenhawk, who feels that, although it’s a “wonderful idea”, unless everyone was on the same schedule, there would be a “mismatch in service levels across intermediaries, lenders and clients”. He is, however, a fan of flexible working times and locations.

Guy’s comments hint that the reticence could be due to it being viewed through too binary a lens; a vision of half the market taking Friday off and transactions grinding to a halt as a result. But it isn’t a foregone conclusion that we follow this pattern, or that we can’t consider alternative routes to shorter working time and reap the benefits. The IPPR puts forth several options, including increased annual leave entitlement; fewer daily hours but the same number of days (which has less of an impact on operations); expanded parental

leave (helping to rebalance the share of work); and sabbatical rights.

someone isn’t around for 24 hours, does that not indicate a broken system?

A broker who recently made public his intention to give a four-day working week a whirl is Stephen Burns at Adapt Finance—and he is finding it achievable.

His message is to start focusing on productivity, rather than time put in.

“It’s a couple of extra hours a day based on 40 hours, which many employees do anyway. Working from home helps, as commuting time disappears,” he expands. To combat availability issues between the many moving parts (lenders, brokers, lawyers, valuers, surveyors, sellers and buyers) in a typical specialist transaction, he believes that most companies will still need five-day coverage, but with fewer hours in each.

“It’s just not practical for us, given that we are a small team and working flat out every day—as well as at some points over the weekend,” shares Andy Reid, sales director at TFG Capital. “In our business there would need to be a whole lot more communication between all parties to manage expectations and to ensure that any absence is completely covered by another individual who can step into their shoes and take over without interruption. ” The importance of communication; now where have I heard that before…

In order to maintain “case continuity”, Jack Coombs, director at Aspen Bridging, agrees that a five-day approach is necessary. Another lender said that for underwriters and lawyers, they “could not imagine” a four-day week functioning, given how deadline-driven the sector is. Reduced hours and/or days would rattle bridging customers, for example, who have become accustomed to their case manager’s constant availability.

“The whole point of specialist finance is the speed at which we can make decisions,” claims David Rainford, managing director at PMJ Capital.

“Our key USP is our accessibility.”

Kirsty Botten, BDM for the South East at Roma Finance, thinks that workflow could be managed around a four-day week, but that reliance on third parties means it already feels as if “there are never enough hours in the day”. She adds that shift work could mitigate this (a common suggestion from those I speak to), admitting that it would be nice to have extra time to rest, run weekday errands not possible at the weekend and assist relatives when needed.

A theme emerges that starts to feel a bit uncomfortable. Although I understand the need to be on the ball in this business, I’m struggling to accept why work cannot be redistributed and managed in a way that provides a seamless service. Are responsibilities shared proportionately enough to ensure there is true continuity that doesn’t rely on siloed working?

If a case loses momentum because 30

Bridging & Commercial

Liz Syms, CEO at Connect for Intermediaries, sees an improved worklife balance as a motivating factor for when people are at work, and has read up on its positive influence on sick leave and attendance. “It’s not as simple as just giving everyone Fridays off, and would need a bit of thought and planning,” she says, but also points to a more general flexible approach as a less complex way forward. She is mindful of the gradual return to the office and/or adoption of the hybrid model of working from home some days and whether, in time, that will dictate the demand for further options and possibly the four-day week.

I am particularly keen to hear the thoughts of Laura Brown, senior associate at law firm Howard Kennedy. She feels that reimagining the work week—while not without its practical challenges, especially for a profession that bills by the hour—could bring a much needed re-centring of priorities. “The concept of core hours is, in my view, antiquated, particularly where the proliferation of digitisation has resulted in the blurring of lines that mark the start and end of the working day.” She references “pockets of unproductive time” within a traditional structure that can be eliminated, and adds that the greater dependency on technology frees up time that could be put to better use. “A shift in focus from time spent to outcome-based evaluation would be most welcome,” she proposes, envisaging a workforce that performs better and is less stressed.

On top of this, a revised schedule could help to redress issues of gender inequality.

“The double burden faced by women has long been an important topic for me.

Women still take career breaks to have a

Zeitgeist

family and a change to working structure may prevent the permanent loss of many skilled women from the workplace.”

Erika Harris, director at Red Eight Capital, implemented a four-day working week for herself upon returning from parental leave. She reports a more balanced life and an elevated output, but that fitting in the same volume of work in fewer hours can feel overwhelming. “However, we need to understand the difference between ‘busy’ and ‘overwhelmed’,” she stipulates. “Busy is great; overwhelmed is a signal that something is amiss. So it’s an opportunity to review working practices and understand how we can make the best use of our time.”

Happy days!

Erika discloses that managing clients’ expectations is challenging but that it is important for her to set boundaries that include defined work and family time. “Of course, I am flexible; if a client has an urgent requirement, we accommodate them and will work when and how the transaction demands.”

It will take “a collaborative industry review” for this seismic shift to be a success, says Alison Houghton-Corfield, national relationship director at Master Private Finance. “How do we roll out such a significant change for all industries and justify the cost impact, especially postCovid?” questions Aaron Noone, sales and operations director at Master Private Finance. “Also, the narrative is heavily focused on benefitting the employee, however, not all employers are altruistic.

How will you motivate those who refuse to change? There is lots to consider.”

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For swift and simple bridging finance, take the Alternative route.

Despite the consensus, there is widespread recognition of the many upsides with regard to employee happiness and wellbeing—they’re apparently just not convincing enough.

What I was hoping would come through was the confidence that a four-day week would incentivise teams to work smarter, as, if we’re honest, we can all be more efficient with our time. And is requiring all parties to rethink how they structure and define workflow a bad thing? I think not. The way I see it, you’re not losing four days per month; you’re gaining the time to make those four days really count.

Get in touch with us today!

020 8349 5190 alternativebridging.co.uk

31

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20/09/2021 08:48

Sept/Oct 2021

32 Bridging & Commercial

33 Sept/Oct 2021

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35 Sept/Oct 2021

Cover Story

36 Bridging & Commercial

Cover Story

s I write this, droves of climate change activists are camping out on the M25, barricading airports and gluing themselves outside the Houses of Parliament—and the country is in uproar over the inconvenience. Instead of being outraged, we should all be analysing and questioning what the powers that be and the chief emitters in our sector are actually doing in terms of putting sustainability higher on the agenda. A brief period of frustration is far less painful than the chaos the climate crisis will cause.

It’s time for the property market to look at the bigger picture There is a sense of reluctance in the air. When researching for this article, I received an overwhelming amount of feedback, commentary and opinion from a wide range of experts working in the built environment.Yet I do think it’s telling on where we are in this uphill battle that many finance providers chose not to get involved. I hate to say it, but short-term lenders can also be guilty of short-term thinking.

To fight the climate emergency, as an industry, we must remove CO2, replace polluting products, and develop mitigations for being able to live with the changed weather. But are we on track?

Words by

BETH FISHER Illustration by

VALF

37 Sept/Oct 2021

Cover Story

The property market is part of the problem The built environment contributes around 40% of the UK’s total carbon footprint.

While this has reduced since 1990, mainly due to insulation installation, the decarbonisation of grid electricity, and new-build homes being more energy efficient, our legacy housing stock is dragging us down. On top of this, annual embodied carbon through construction alone is currently higher than the UK Green Building Council’s (GBC) target for total built environment emissions by 2050.

Last year, the residential sector accounted for 20.8% of all carbon dioxide emissions in the UK, not far behind transport (29.8%) and energy supply (24.2%).

While greenhouse gas emissions famously fell by an estimated 10.7% in 2020 as a result of the pandemic’s standstill (remember when the roads were empty and all we heard were birds and 8pm clapping?), the residential market was the only one to see a rise.

A new report by the National Engineering Policy Centre has urged the construction sector to decarbonise at a rapid pace. It brands the current linear economy of ‘take, make and throw away’ as unsustainable.

“The manufacture and installation of concrete is the second biggest polluter on Earth,” states Iain Davidson, portfolio manager at Mint Property Finance. The production of timber, copper or plastic pipes, bricks, roof tiles and plasterboard all require heavy manufacturing, and their delivery to site is largely dependent on fossil fuels. “The UK construction industry hasn’t changed for some 40 years, and we have finally realised just how harmful our outdated practices are to the environment,” adds David Travers, CEO at Impact Lending.

According to a study by the Empty Homes Agency, ‘New Tricks with Old Bricks’, a new home can give off 50 tonnes of embodied CO2, while a refurbished property will emit just 15. Despite this, the focus seems to be on building new.

There is a vast disparity between the advances being made in new-build technology and the solutions we have for bringing existing stock up to standards.

“In the automotive sector, we saw initiatives where you were incentivised to trade in your old banger to get the most polluting vehicles off the road.

That’s not an option if you live in an old house or work in a listed property,” says Nick Jones, sales director of bridging and development finance at West One. Most people are probably unaware of how much our industry impacts climate change; the focus thus far has arguably been on the responsibility of individual owners when it comes to our homes (greener boilers, domestic recycling and solar energy—for those who can afford its installation).

We rarely see protesters occupying new property development sites like they do airports. But with rising consciousness, the shift will be swifter than expected.

Aaron Noone, sales and operations director at Master Private Finance, is not afraid to admit that our sector is a capitalist one, but questions whether its current commercial form is working for the majority—and the planet. “Are we bleeding it dry with our eyes wide closed, thinking it’s someone else’s problem to fix? We blamed older generations for dragging us into war and ruling with empires. Will our children blame us for sleeping while the train derails?”

38 Bridging & Commercial

Cover Story

Stranded assets The Bank of England has set out the threats that climate change poses to the stability of the financial system, namely physical, transition and liability risks—elements that also apply to property. Roxana Mohammadian-Molina, CSO at Blend Network, explains the differences: “The physical risks are probably the easiest to comprehend as they refer to the economic costs of natural disasters caused by climate change, such as floods, storms and extreme temperature damage to buildings. The transitional risks refer to what occurs in the move towards a cleaner, greener economy as businesses face major changes in asset values and business costs. The liability risks refer to who should be held responsible for climate change issues.”

The industry has an arduous mission of ensuring buildings can withstand increasingly extreme climatic conditions.

According to UK GBC, millions of homes are at risk of flooding or overheating. I am told that most of these dangers will affect property insurance and valuation.

Assets across the UK will bear the brunt of this, with cities such as Brighton, Cardiff and Belfast forecast to be most exposed, according to a study by emoov.

It expects properties that are likely to become damaged will cause major uncertainty for lenders, resulting in higher mortgage deposits and lower LTVs. An increase in rainfall, inland and coastal flooding, storms, severe temperatures and erosion pose some of the biggest physical risks to commercial and residential real estate. To put this into context, around 5.2 million (or one in six properties) in England are susceptible to flooding.

The Environment Agency predicts that as the population grows, the number of buildings in the floodplain could almost double over the next 50 years. “It seems

we’re getting used to those awful scenes of people shipping water out of their front rooms every year,” imparts Nick.

Building consultancy firm Sillence Hurn is witnessing the consequences of unpredictable weather first-hand. “We’re currently project managing repair works due to coastal subsidence,” managing director Alex Hurn tells me. “While we know that properties in coastal and lowlying areas tend to be more at risk, we’re seeing extreme weather events occurring across the whole of the UK. These types of repairs are becoming more common.”

The potential of rising water levels could also result in properties being deemed unmortgageable. “The impact of climate change is being regularly reviewed by the UK banks to assess the level of financial risk this could create in the years ahead,” claims Chris Oatway, founder and director at LDNfinance. Going forward, larger areas of the country are expected to be affected, which will culminate in further risk metrics for lenders and an uptick in pricing.

Joe Flaherty, director at Beaufort Capital, senses that finance providers will look closely at flood risk assessments. “We’re already seeing evidence that previous one-in-100-year flood events are becoming more common, so a prudent lender should be focusing on such things when making lending decisions.”

Getting the drainage right on a project is vital, stresses Robert Dale, senior partner at Daniel Connal Partnership. “Recent events in New York and Germany have illustrated the potentially catastrophic consequences of very heavy or prolonged rainfall rapidly overwhelming urban drainage systems or natural water courses. For some time now, drainage has been a major consideration for any

planning application.” He can see the potential for further legislation, such as the introduction of flooding into the building regulations, making flood risk assessments mandatory for all planning applications, and commanding that changes to surfaces—such as patios, artificial grass and other impermeable exteriors, which are currently part of permitted development—are subject to statutes.

As floods intensify in frequency and severity, they will likely alter the existing flood zones, which will have implications on planning permissions by local authorities and the ability to insure houses within these areas. Rachel Norris, senior vice president of real estate and construction at insurance brokerage Lockton, believes we need to be learning lessons from other countries.

“Historically, the US and Asia, in particular, have been significantly more exposed to weather-related risks than Europe. But an increasing incidence of weather-related catastrophes in Europe will drive up real estate insurance costs, leading to either under or no insurance.” She claims that the threat is already widespread and may influence the creditworthiness of investors, as well as lead to default rates in highly vulnerable areas. These liability risks have added a new layer to the decisionmaking process, which is changing the very face of property investment.

While it may not be common practice right now, the financial underwriting of increased long-term risks around climate change will very quickly create a two-tier property market, with less-affected areas seeing prices soar. A study by tado found that UK homes are far more susceptible to the harm of heatwaves than those in Europe— and there is also a difference between North and South. Homes in Scotland, for example, are more likely to heat up during hot weather compared with those

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in southern England. “The UK housing system is already severely imbalanced; taking further stock out will make the problem worse,” argues Louise Nadine, client growth manager at Totum Finance.

While the focus tends to be on the world heating up, Stuart Law, CEO at Assetz Capital, points out that the UK could end up being colder in years to come, due to the Gulf Stream slowing down. “While we rush to future-proof real estate against global warming, we also need to be thinking about how we deal with a situation where it may get colder here, which will exacerbate energy usage further, and may mean that the government targets for energyefficient homes are still not enough.”

It will start to affect value

Rachel Norris implores the industry to embrace buildings data, something that is far more advanced in Asia and Australia. “Through data analytics, an awareness of potential risks can alleviate the impact on investors and better inform decision-making, helping to examine how a portfolio might depreciate and how this can be avoided, as well as how to factor risks and costs into balance sheets, thereby reducing volatility.”

Sustainability is beginning to be factored into valuations. Since April 2018, new private rented tenancies have been legally required to have a minimum EPC rating of E; from 1st April 2023, this will apply to existing ones, too.

For commercial, the government is proposing that all non-domestic rented properties meet a minimum B rating by 2030. “As sustainability and corporate social responsibility pressures increase, both landlords and occupiers are going to be including these matters as a main factor when deciding on occupation options,” Alex predicts.

The likelihood of future regulations that could leave assets ‘stranded’ are also troubling lenders. This could result in them being warned off certain types of property but, in turn, it may free up capital for more socially conscious investments.

“Banks will need to review and revise lending appetite for higher-risk assets and price accordingly. However, this may also create opportunities for specialist property lenders,” comments Mike Hudson, chief risk officer at Cambridge & Counties Bank.

Assessing a property’s energy performance rating is a core task for surveyors. In addition, they will be considering green features—such as rainwater harvesting, grey water recycling, ground or air source heat pumps, solar panels, smart building management systems, recycling systems, wind turbines, measures to prevent solar gain, a BREEAM rating, electrical vehicle charging points, bike stores and smart metering—all while noting environmental risks.

It’s important to note that any measures from government or lenders will need to be implemented in a considered manner to avoid developers and consumers being burdened with staggering costs. Simon Das, managing director at 978 Finance, points to the cladding debacle as an example of a sudden shift in regulation, with some leaseholders in high-rise apartments facing bills of over £100,000 or stuck with an unsaleable and unmortgageable property. Ben Colling, director of portfolio management at Maslow Capital, warns that buildings that don’t meet future criteria or government regulations will also be regarded as second-tier assets.

Insulation, renewables, double and triple glazing and solar shading, ventilation, energy-efficient LED lighting and landscaping/green screens are further elements surveyors will take into account.

When I ask what the biggest boosts to green value are, MEES compliance comes up the most. Improved EPC rating is slowly starting to become a key lending requirement as a result of regulatory 40

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“While we rush to future-proof real estate against global warming, we also need to be thinking about how we deal with a situation where it may get colder here, which will exacerbate energy usage further” changes, and this is expected to filter through to the consumer. “Green features that have a positive impact on valuation include solar installations, good double glazing, heat pumps and efficient boilers,” notes Ana Bajri, senior technical manager of risk and compliance at Countrywide Surveying Services, adding that ‘brown features’, such as poor glazing, have a negative effect. “However, other aspects, such as house and garden size, number of bedrooms, general condition and location, remain major drivers of value.”

David Cran, director at Bradley Hall, is beginning to see investors on the hunt for properties with higher EPC ratings and BREEAM rankings, but feels it’s not yet clear if values are consistently commensurate with these. He explains that the lack of grade A office supply in our towns and cities has resulted in little distinguishable difference in price between those with sustainability considerations and those without. However, a purchaser of a building with a low rating would need to invest a significant amount to improve its efficiency to let it out. “As landlords and occupiers continue to seek such space and demand recedes on secondary, lower-rated stock, this will drive higher capital values on properties that are more energy efficient.”

On the other hand, research by Aviva Investors highlights that green buildings can achieve a sales premium of between 5–35%, rental uplift from 2–24%, and a climbing brown discount of up to 10% where buildings aren’t actively

decarbonised. The commercial opportunity is clearly there. For example, the asset manager’s real estate debt team has delivered over £600m in sustainabilitylinked loans in eight months, and its climate transition fund, which targets decarbonisation opportunities in real estate, has attracted £500m of seed funding.

Stuart expresses that valuers are not currently giving eco homes the premiums they deserve. “The knock-on impact of this is that housebuilders’ appetite to build them is being suppressed by valuations that do not support the extra investment cost of that quality of build.

The RICS has a responsibility to lead the way and encourage the inclusion of energy savings in the valuation of a house, something currently steadfastly refused by many valuers we encounter.”

Nadav Albin, head of origination at Shojin Property Partners, points out that due to a scarcity of local comparables, it could be “slightly more difficult to obtain true values for net zero properties on a security basis”.

Iain adds: “Valuation policies in Europe are already undergoing change and will see building owners who have high energy efficiency, low maintenance, sustainable recycling, rainwater retention, attenuation and recycling capabilities rewarded. It is hoped that this will drive real progress.”

Currently, there is limited evidence that wider sustainability considerations are having an effect on residential property valuations. Ana imparts that red book

reports presently make no more than “a passing reference” to these.

Although not seeing a consistent improvement in values where green investment has taken place, David Cran observes that some low-cost measures being carried out by landlords are providing a better return on initial investment. These include replacement of lighting with LEDs, various renewable heat sources and, where appropriate, solar panels and biomass boilers.

Dale notes that while people might be prepared to pay more to live in an ecofriendly home at a basic level (eg one that has double/triple glazing and high quality insulation), there is a ceiling.

“When people are house hunting, most will be driven by available budget and the number of bedrooms/proximity to a good school/transport links, rather than sustainable features.”

Sabinder Sandhu, head of operations and marketing at Avamore Capital, believes the biggest risk is that the homes being built today may not meet the requirements of tomorrow. “With no set rules for developers, few will be incentivised to spend more money making their properties green. While there is likely to be a grace period for new homes to be sold without complying to any new regulation which may come, buyers will probably be wary of purchasing properties which could plummet in value later on or incur additional expenses in making them more sustainable.”

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“It’s time the banks that have been around hundreds of years, and those that want a similar legacy, recognise that their very survival depends on their ability to adapt to something other than interest rate changes” 2050 isn’t that far away Considering how much the property sector has evolved over the past 18 months, it is more than feasible that a vast transformation will be seen during the next three decades. “Technology, procurement and building methods, as well as materials, regulations and working practices will, in my opinion, all change dramatically during this time,” forecasts Iain.

However, there seems to be a serious lack of direction when it comes to green thinking from both finance providers and borrowers, with shortto medium-term priorities favoured on capital returns. “Where property is being purchased to be refurbished or redeveloped, the focus is often on cost as opposed to energy efficiency, meaning that second-hand buildings are not seeing a substantial improvement in green credentials,” claims David Cran.

Aaron is also seeing very little change or engagement from lenders in particular, with the majority treating eco homes and new building technologies as specialist or non-standard construction, limiting LTVs and client types. “The banks and lending institutions have no appetite to change and are missing a business opportunity to market ecological progress as a USP, driving change and supporting in the crisis. To this date, the people who make decisions are still fiddling while Rome burns (literally).” He divulges that while placing clients with suitable products, an ecological element to a loan,

even if it was priced higher, would be a motivating factor for a number of them.

If sustainable products don’t exist, intermediaries have nothing to offer, Aaron adds. “Lenders are dismissive of anything made from anything other than bricks and mortar; it’s time the banks that have been around hundreds of years, and those that want a similar legacy, recognise that their very survival depends on their ability to adapt to something other than interest rate changes.”

Dale also questions whether borrowers and lenders are putting the emphasis on sustainability. While he believes that most have good intentions, the majority of developers and their funders will always look at profits. “While we can recommend more green options, I’ve lost count of the number of projects I’ve seen that originally included sustainable features which, if not sacrificed, were ultimately pared back to ensure the bottom line was met.”

Rachel Borlace, director and head of agriculture and renewables at MAF Finance Group, stresses that finance is “not a bystander” during this crisis.

Peter Miles, CEO at sustainability company eHempHouse, underlines the power that financiers have. “Builders will go where they lead. They should, for example, prioritise projects that are environmentally friendly and refuse to fund those that are paying no attention to emissions. Developers would soon make the necessary changes.”

Pivot, for example, is actively looking at how it can offer green loans that reward developers based on how well they score on its ESG scale. “The measurables for this 42

Bridging & Commercial

include how much renewable energy is used, the reuse of grey water, investment in green technologies and many other factors,” shares head of commercial operations and marketing Brian West.

It is also looking to partner with an ESG fund that will score its borrowers’ schemes and provide them with additional leverage on top of its senior facilities, commensurate with their green credentials.

John Carter, managing director of commercial real estate at Aldermore, believes green securitisations will impel lenders to be more conscious about the properties they put on their books. “If the BEIS consultation comes through as proposed, then lenders will be required to ensure the average EPC of their back book hits designated thresholds and lenders’ performances could be shared in league tables,” he explains. The consultation will inevitably impact which properties finance providers will be willing to fund.

The introduction of a two-tier interest market, where environmentally harmful projects or buildings would be slapped with higher interest rates, is an appealing suggestion. “The extra funds raised could be used to offset the impact. Environmentally sound deals would, overnight, become more profitable,” expects Steven Smith, client growth director at Totum Finance.

Michael Stratton, managing director at MS Lending Group, says that while short-term lenders aren’t involved in the build process, they still need to focus on what they can do to make a difference. “That is why we are supportive of the process. For example, we help our clients understand that sustainable

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Behind the slow take-up

material costs may rise and therefore the LTV may need to be more flexible.”

There is also a surge in sub-contractors using locally produced steel to reduce the carbon footprint of developments.

“Thermal insulation and low U-values for external walls, glazing, roof and floors are prominent, too,” notes Ben. “From a lender’s perspective, we also support the use of MMC where the carbon footprint can be reduced by manufacturing certain elements of the build in a controlled factory setting.” With extreme weather conditions set to further impact, or even halt, construction site activities, this is yet another incentive to build offsite.

Max Abbott, assistant surveyor at CrowdProperty, reveals that while sustainable practices are being adopted, less sustainable and more cost-effective measures are still a developer’s preferred choice. “Nonetheless, we anticipate the next five to 10 years will see a rapid increase in take-up of sustainable practices and technologies.”

When asked whether companies in the property market look at the eco credentials of businesses they work with, it was clear for some that it was quite far down the list.

“It certainly helps when we see common values but, ultimately, we need to do what’s right for our clients, so favouring partners with green credentials is not always possible,” states Simon. Adam Tovey, valuations director at MSP Capital, adds that most companies are not yet advanced enough to have such a strategy in place, and therefore feels it is “too premature to discount a company which is not green”.

For as long as I’ve been writing about the property market, the UK’s housing crisis has dwarfed any progressive talk of sustainability. Having enough homes for the growing population trumps its importance, and this is especially prominent as a result of the pandemic, which has shone a light on the broad spectrum of living conditions.

Tiba Raja, executive director at Market Financial Solutions, points to the dearth of affordable housing continuing to dominate the news, “while the environmental impact of traditional construction and maintenance methods recedes into the shadows”.

Another factor making it difficult to achieve sustainability is the general lack of awareness around the true impact of real estate on the environment and the carbon footprint behind the products and techniques used. “The property market, and specifically the construction industry, is very traditional and has strong roots in tried-and-tested methods dating back decades,” remarks Nadav. Unfortunately, there isn’t one simple fix; the materials and supply chains in this sector are enormous. The industry needs the bigger players to get on board in order for sustainability to become the norm.

Jonathan Rhodes, head of commercial valuations at Cluttons, feels that the measurement of carbon emissions is hugely flawed. “Until we start to include embodied carbon from the build, demolition and fit-out process, we cannot tackle the issue properly.”

A lack of government policy and guidance from other stakeholders, such as the Bank of England, is also hindering the industry’s ability to go green. Nadav believes there needs to be incentives for sustainable solutions, such as financial relief, exemption of a Community Infrastructure Levy, or expediting planning permission for sustainable developments. “There are also issues relating to regulations, calculation of U-values, and the ability to mortgage alternative houses which do not fit the norm,” he adds. “Unless there’s a holistic, centralised approach supported by those at the top, adoption will be slow and will require a consumer-led revolution.”

However, government intervention has clearly been tempered by the impact of Covid. “Construction is such an important part of the market now to drive employment and growth. Placing further restrictions could be seen as an effective tax on the market,” cautions Ellen McCarthy, associate at Totum Finance.

“We need a more radical approach.”

While the government is currently implementing its Green Industrial Revolution, with strategies such as the 10-point Green Recovery Plan, David Travers feels that sector pick-up still seems lethargic. “This comes down to the fact that we are looking at guidelines and incentives, rather than rule reinforcements.”

It is suggested that penalties or surcharges should be levied against those that lag behind. We’ve already seen calls from the Environmental Industries Commission for a greenfield surcharge to help meet the government’s housing ambitions, so something similar to encourage climateconscious building could be envisaged.

Patrick Chauvin, executive director of assets and homes at Stonewater, thinks measures could be more ambitious to build to higher standards quicker.

“Other incentives could be introduced to influence the property market, such as stamp duty reductions for homes that are more efficient or for homebuyers who commit to making improvements.”

978 Bridging has forged partnerships with companies involved in the government’s ECO and Green Homes Grants schemes and has been referring developers to them. However, Simon alleges that these initiatives have layers of bureaucracy, complex distribution channels, and regularly change, restricting the flow of money into the marketplace. “We hear from a number of our developer clients that these funds were unobtainable or added so much complication to the build process that actually implementing the measures and accessing the funds became completely unviable.”

Nick argues that successive governments for the next 30 years will need to go against their instincts and look beyond

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“If the government mandated that all developments be zero carbon by an earlier date—say 2030—it would be achieved. The industry would find a way” the next election to develop a meaningful long-term strategy when it comes to property. However, Daniel Austin, CEO and co-founder of ASK, asserts that “it will be hard for the government to prioritise and financially incentivise environmental factors” while we have a housing crisis and a steep economic recovery to make.

Edward Dixon, head of ESG for real assets at Aviva Investors, highlights that the real estate industry is a critical component of retirement savings and a major provider to the global economy. “The market has failed to account for its contribution to the climate crisis, and that failure will gradually need to be corrected.”

Without grants or subsidies, building sustainably will likely come down to a costbenefit analysis, according to Joe. “Take a new-build office development in the heart of a major city, for example. It will be much easier to justify the cost of achieving an ‘Excellent’ or ‘Outstanding’ BREEAM rating, because the rents and values will justify the additional costs. The challenge will be in the conversion or repurposing of existing stock, which may have been built over 100 years ago, or developments in lower-value locations, where the end values will simply not justify the costs of meeting those sustainability targets.”

Charlie Armstrong, co-founder of LEXI Finance, agrees that the industry needs more government incentives to tilt the playing field further in the direction of sustainable development. “There’s little point having a swathe of environmentally minded developers struggling in the market because they’re less competitive than their non-sustainable rivals.”

Another challenge the industry faces is higher building costs. “More often than

not, sustainability means an increased construction cost due to the materials being more expensive,” states Nadav. “Unless you are opting to charge a premium, which can be justified although it carries a risk, the margins could be squeezed.”

Procurement issues created by Covid and compounded by Brexit has pushed the prices of materials to an alltime high. “Simply remaining afloat and making a profit is challenging enough right now,” Simon says.

Daniel adds that UK land is in high demand and short supply, which makes it incredibly hard to make money if build costs are also climbing, resulting in eco decisions being “sidelined”.

Analysis by Savills shows an increasing desire for energy-efficient homes, with 49% of buyers stating green credentials have become more important. However, the company believes a green premium is typically found only on larger new homes, often achieved as part of a wider package of high quality features; furthermore, homebuyers are only willing to fork out an extra £2,800 for this.

Adam agrees that increased construction and sustainable materials costs are not yet being reflected in sales values. “Investment is needed in further new, cost-efficient building technologies which can be implemented across the property sector without the need for specialist contractors.”

While many developers feel that customers won’t pay a premium, Sean O’Leary, founder of Mackenzie Byrne, believes this is simply a perception.

“If the government mandated that all developments be zero carbon by an 44

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earlier date—say 2030—it would be achieved. The industry would find a way.”

Although the market will be the deciding factor in whether a scheme succeeds or not, regardless of its green credentials, Joe expects end-purchasers and users to become more discerning when it comes to sustainability in their home or workspace. “While the short-term costs can seem off-putting, provided that it will not result in an end product that is wildly out of step with the local market, it should be seen as money well spent.”

While the costs are higher in the shortterm, Rachel Norris believes that the long-term benefits of building smarter properties in terms of climate risk and resilience “massively outweigh” this. In time, these technologies will also become more competitive.

If developers can’t secure funding for these more expensive projects, they can’t be built. “While there is a clear appetite to drive the green agenda from all parties involved, there is still a very significant logjam in the system—namely the lack of available funding,” says Brian.

“Development lenders are all too often governed by restrictive covenants that have been designed around houses being built in situ over several months, as opposed to being delivered off the back of a lorry and erected in days.”

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Rethinking and acting Ways to help decarbonise the built environment include utilising MMC and reusable or recyclable units, intelligent design to reduce offcuts and wastage, selecting sustainable materials, and installing smart technology monitors and controls. Biodiversity improvements through living walls, green roofs and biomass boilers can also help.

“Although humans have learned to build magnificent structures, many techniques and materials used today are centuries, if not millennia, old and at odds with the current global predicament,” says Edward. He points out that the boom in capitalism and urbanisation since the 1950s has developed a “taste for newness” by demolishing and starting again. The challenge, he outlines, is to decouple the growth for new housing from carbon, which he believes can only be done by making more with what we already have.

Dr Finian McCann, senior lecturer in structural engineering at LSBU, is a co-investigator for SCRAM—a project that aims to define a new model of circular manufacturing by 3D printing with recycled plastics. If scaled up across the construction sector to replace 20% of structural concrete, the proposed innovation could offset approximately two million tonnes of concrete in the UK each year. “The big issue is always about risk. A contractor knows how to use concrete and steel—they don’t know how to use 3D-printed recycled plastic.

I think that the onus is always on the researchers to de-risk these projects.”

The finance industry will need to support smaller players in the market—which are often the biggest innovators—by offering higher LTCs for sustainable loan products.

“Perhaps because of the greater need to drive commercial efficiencies, SMEs tend to be much better at making clever use of brownfield sites and existing infrastructure, rather than creating new facilities, which

has an increased carbon output and is wasteful of materials,” imparts Stuart.

Daniel agrees that the trend for converting distressed retail and outdated offices into residential accommodation is a far more environmental approach than demolition, and something that will be encouraged by new permitted development rights. “It also keeps costs lower, which allows budget for retrofitting lower carbon improvements.”

Iain suggests the industry needs a full review so that we can conceive a supply chain that is as environmentally friendly as possible—from energy-efficient products that are delivered to sites by electric vehicles and fitted by workers who drive to work in electric cars and vans, to homebuilders that incorporate sustainability into every possible element of the design, from the recycling of water and disposal of domestic rubbish to gardens that produce carbon-capturing plants. However, unless the energy market reforms (gas is currently cheaper than electricity, for example), there is no incentive for electrification and the use of innovations such as heat pumps.

Partnering with green-building experts can also free up time for businesses to do what they know best and maximise returns. Last year, sustainable design and engineering company Phioneers worked with a developer that had a large amount of land allocated to it for a residential housing estate. On reviewing the plans, Phioneers discovered there was wildlife on the site, and was able to change the layout to maintain the area as a mini nature reserve. “We also influenced the inclusion of lots of trees and plants, plus rain harvesting and solar systems,” says CEO Ousman Touray, adding that these saved the client a significant amount of money. “A key element of sustainability is the economic aspect. In most cases, the most sustainable solution also reduces OPEX costs in the long run.”

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The changing appetite of investors Nedgroup Investments Global Property Fund warns that listed real estate businesses and REITs will be left behind by shareholders if they fail to hit net zero by 2030. It claims that environmentally compliant real estate assets benefit from greater tenant demand; energy, water and waste efficiencies, reducing operating expenses and making buildings more profitable to run; higher occupancy rates; and large sales, appealing to a wider pool of buyers.

Research by Global Palladium Fund found that UK retail investors are progressively more supportive of sustainable initiatives, with 47% planning to devote more cash to companies and funds at the forefront of the green revolution.

A RICS report found that 55% more respondents pointed to an increase in occupier and investor appetite for green and sustainable buildings in the past year, and half believe green buildings can charge higher rents. For properties that aren’t sustainable, 30% cited that they are given a ‘brown discount’.

With investors increasingly refusing to put their money into projects that are harmful to the environment, the building sector is urged to get its house in order if it’s to continue attracting investment from broad capital pools. “We are seeing individual investors focusing much more on sustainable projects that have strong environmental credentials,” says Stuart.

“It also means that issues like flooding and other environmental considerations factor much more heavily in the due diligence process for institutional investors than they ever have before.”

“Get learning as soon as possible and develop your expertise.

Create small goals, establish milestones, and celebrate change”

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Driving the green agenda forward Aaron believes that the lenders and firms who have significantly benefited financially over the years owe it to Earth to put back some of their gains for future generations.

“Dinosaurs inhabited the planet for 450 million years and died as a result of an asteroid strike. We have lasted about 100,000 years and killed ourselves.”

With the UK soon to be hosting the COP26 summit in Glasgow, all eyes will be on world leaders’ commitments in the hope of accelerating change. As the climate crisis is brought into sharper focus, the role of the built environment will become more defined. But where do we start?

Roselle Allsop, group head of marketing (lending, digital and design) at OSB Group, tells me that, as a marketer, she is responsible for helping to inform and educate in an engaging way so that the messages land well and with impact.

“Tackling an issue of this scale can only be achieved by embedding the values and principles within an organisation, and communicating these messages internally as well as externally.” She emphasises that we’re not limited to one solution and, if businesses don’t take the time to form a strategy, they’re in danger of appearing insincere. “We’ve already seen early signs of greenwashing where a company may offer to plant a tree for every transaction while, at the same time, insists on a paper-heavy application process. This doesn’t come across as a genuine effort and is something the consumer can see right through.”

Aleksandra Njagulj, global head of ESG for real estate at DWS, feels it requires a wholesale change in the way of working.

“The current preferred approach we see in the field is to establish an ESG team or engage a consultant to offshore all of the sustainability work. This is a shortterm patch,” she states, adding that the

only future-proof route is to integrate ESG in every aspect of a business and make it part of everyone’s daily work.

quality and flexible materials that will “stand the test of time and will not end up in landfill in a few years”.

John believes the best way to make progress will be through collaborations with lenders and third parties who either support the property supply chain or represent it, such as professional bodies and member associations. “Collective initiatives, such as the Coalition for the Energy Efficiency of Buildings, the Net-Zero Banking Alliance, Bankers for NetZero and the PCAF UK Coalition, allow parties to share learnings or barriers encountered, provide guidance for firms that are setting commitments and taking action, and allow for financial institutions to set clear signals of their intent.” He urges the industry to recognise that we’re all in the same boat.

“Nobody knows everything, but by all of us taking steps in the right direction, we will learn and improve together.”

There are also huge commercial upsides for early adopters. “At some point in the very near future, strong eco-credentials will be the deciding factor in which companies thrive and which don’t,” comments Stuart. Louise points out that generations Y and Z—the future talent and consumers of the industry— are “watching and judging us based not only on performance, but how we contribute and what standards we set”.

Iain notes that there are no quick wins or easy solutions when it comes to the climate crisis, but thinks companies should start the awareness journey swiftly. “Get learning as soon as possible and develop your expertise. Create small goals, establish milestones, and celebrate change.”

Key advice is to start with the things you can achieve. “That could be introducing a bike to work scheme to promote cycling (making sure there are showering facilities!) and getting an energy assessment for your office to see where you can improve efficiencies in things like lighting and heating,” proposes Nick.

Another way companies can make a change is by engaging with the carbon offsetting markets. “The industry is going to take time to become carbon neutral, time that the climate doesn’t have, so it’s not enough to become as environmentally friendly as you can—you also need to help remove CO2 from the atmosphere,” Peter explains.

Rob Beacroft, director at Lateral Investment Management, says companies should look to reducing waste and investing in longer lasting,

Roxana exhorts businesses to act now. “If you think it’s costly to introduce change today, wait until everyone’s done it and you find yourself funding stranded assets and buildings that don’t meet the desired criteria or government regulations.”

It seems the main danger is property finance businesses becoming overwhelmed and ending up doing nothing. “The answer to this is perhaps to make small positive steps,” suggests Brian.

“Set two or three achievable goals and, when you’ve succeeded with these, move on and set some new ones.”

David Travers encourages businesses to explore products that are already in the market and examine their criteria. “The movement towards enabling a carbon net zero future needs to be a collective one; there is no harm in using existing products to inspire new and alternative options.”

While there’s no excuse for businesses in our industry not to have already implemented simple changes (such as going paperless and having good recycling systems), the focus now needs to be on the next step. “Try to put a small amount of time aside each month to look into green initiatives,” advises Simon. He also recommends opening up the discussion among peers. “It doesn’t take much to start an industry-wide conversation—and the more people are talking about this, the more likely we are to see developments that really make sustainable housebuilding the priority it needs to be.”

47 Sept/Oct 2021

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The CIC-Zero Carbon Park — the first zero carbon building in Hong Kong (Copyright: Construction Industry Council)

Exterior of a Passivhaus home (Source: iStock)

52 Bridging & Commercial

Six ways we are building green— globally Words by

andreea dulgheru Over the past year, we have seen the UK bring forth a variety of measures and support schemes to ‘build back better’ and cut carbon emissions—but we’re not the only ones working hard to make the built environment more sustainable. We’ve looked across the globe to draw inspiration from what our neighbours and distant nations are doing to make this sector greener

1. GERMANY Home of the well-known Passivhaus system—a voluntary standard for energy efficiency in buildings—Germany is no stranger to effective, sustainable construction methods, and has continued to transform its development industry through a variety of initiatives. After introducing tax reliefs for energy-efficient renovations at the beginning of 2020, which allowed citizens to deduct 20% of the costs up to €40,000 from their taxes, the German government launched the Federal Funding for Efficient Buildings in January this year as part of its broader 2030 Climate Action Programme. This allows anyone to borrow up to €150,000 for the construction or purchase of a new sustainable home, and up to €60,000 for individual improvements to existing properties. The scheme rewards highly efficient homes through repayment subsidies, which can cut a borrower’s loan repayment from 15% and 50%, depending on the extent of the improvements— the more efficient a property is, the higher the repayment subsidy is.

As of July, more than 150,000 applications have been received and €2.7bn approved for energy-efficient building renovations in the first half of 2021, €610m of which has already been paid out.

2. HONG KONG With around 10,000 skyscrapers and high-rise buildings, Hong Kong is defined by its extensive vertical built environment—but it’s also its downfall when it comes to sustainability. More than 50,000 buildings consume up to 90% of the city’s electricity and account for 60% of its greenhouse gas emissions.

To combat this, Hong Kong has been using every tool in the box to revolutionise its construction sector and promote green building. An extra HK$1bn has been allocated to install additional small-scale renewable energy systems in government buildings and infrastructure, as well as $150m pledged to conduct energy audits and install energy-saving appliances, free of charge, for NGOs subvented by the Social Welfare Department. Hong Kong’s piece de resistance, however, is the Advancing Net Zero Ideas Competition launched in March. A sustainable version of The Apprentice, this calls on international industry stakeholders, designers, academics and technology experts to generate ideas and solutions to accelerate the sector’s adoption and development of low/zero carbon design and technologies. The winner

53 Sept/Oct 2021

View Keppel Bay Tower — Singapore’s first commercial building to be certified as a Green Mark Platinum Zero Energy building and the first commercial development to be fully powered by renewable energy (Copyright: Keppel Land Limited/Keppel Corporation)

Adam Joseph Lewis Center for Environmental Studies, Oberlin College, Ohio — the first commercial building to be Verified Zero Energy by the New Buildings Institute (Source: Wikipedia public domain)

of the two competition categories—Future Building and Existing Building—will be awarded a grand prize of $300,000, while the remaining shortlisted candidates for both sections will share $600,000.

3. CANADA Ranked second-highest in the US Green Building Council’s latest top 10 countries and regions for LEED (Leadership in Energy and Environmental Design), Canada is continuing its trajectory towards a more sustainable construction sector.

The nation knows that climate action starts at home—which is why, over the next seven years, the government will help more than 700,000 homeowners with up to C$5,600 to boost their energy efficiency and reduce their energy bills via its Canada Greener Homes Grant. To make the deal even sweeter, proposals are being discussed to instigate a retrofit programme, which will provide $4.4bn over a number of years to the Canada Mortgage and Housing Corporation to help homeowners complete deep home retrofits through interest-free loans worth up to $40,000.

Part of the funding will go to low-income homeowners and rental properties serving low-earning tenants, including cooperatives and not-for-profit-owned housing. While this is not yet official, it is expected that more than 200,000 households could take advantage of the proposed plan.

4. SINGAPORE Having started in 2005 with the first iteration of its sustainable construction plan, Singapore has culminated its green building journey with the all-encompassing Green Building Masterplan, published this year. Its goal? To hit the three 80s: have 80% of buildings green, ensure 80% of new developments are super low-energy, and achieve an 80% increase in energy efficiency from 2005 levels—all by 2030.

The city-state’s plan is structured in layers. The first is the increased minimum energy-efficiency requirements; existing buildings now need to be at least 40% more energy efficient than the 2005 baseline, while new builds and super-low energy homes must be 50% and 60% more energy-saving respectively. Then comes the Green Mark 2021 certification system, which aims to raise standards in energy performance. The final layer consists of more research and innovation, led by the existing Green Buildings Innovation Cluster. Over the years, this initiative has funded and supported a variety of smart and energy-efficient technologies and solutions for buildings, such as a low-cost online air-balancing system that minimises energy consumption in the ventilation system via artificial intelligence and the IoT.

54 Bridging & Commercial

5. USA After a tumultuous presidential election, the USA didn’t wait long to announce its plans to tackle the climate crisis and make its building sector greener, leading to the CLEAN Future Act (CFA) bill introduced in March. It proposes to improve the energy efficiency of the entire sector, from public buildings to residential and non-profit properties. In a bid to achieve a 100% clean economy by 2050, the CFA is making a large push to retrofit nearly 140 million existing residential buildings through a new home energy savings rebate programme. Under this, homeowners are eligible for US$1,500 for installation of insulation, air sealing and replacement of an HVAC system.The act also proposes $500m per year to be allocated for a second rebate programme to defray the costs of retrofitting an

View Barrett Centre for Technology Innovation, Humber College, Toronto — winner of the Institutional (Large) Award at the 2021 Canadian Green Building Awards (Copyright: Navjotka, Wikimedia commons)

Kristian Augusts Gate 13 — Norway’s first reuse project that is in accordance with the criteria from FutureBuilt (Copyright: Kyrre Sundal / Mad arkitekter)

existing home to be wildfire resistant.

Non-profit buildings often don’t get as much attention as residential and commercial properties when it comes to improvements. The CFA is addressing this by introducing a funding scheme to award grants of up to $200,000 to nonprofit organisations—including hospitals, youth centres and schools—to cover the costs of energy-efficiency improvements for the buildings they operate in.

6. NORWAY Scandinavia is well-known for its sustainability efforts, so it’s no surprise that Norway has big plans for its construction sector. What is surprising is the country’s approach to this. Unlike other nations, Norway’s overall goal is to achieve ‘circular construction’, with

a particular focus on reuse (of both materials and buildings) and waste-free building sites. While there are no official government requirements to enforce this, numerous studies have highlighted the benefits of reuse in the industry.

The Circularity Gap Report Norway 2020 estimates that the recycling of construction and demolition waste into new buildings could see the country’s material footprint drop by 15% and alleviate the negative environmental impact of mining and processing to produce materials such as concrete and steel. Following this, the government announced in January that the Directorate for Building Quality will prepare a guide for the reuse of building materials, as well as study and propose changes to national rules so that these promote the reuse of

building materials to a greater extent.

But is it actually possible to transform buildings by using recycled materials and the existing structure? Property developer Entra has proven it is with the completion of Kristian Augusts Gate 13 in Oslo, a 1950s office building that has been completely revamped using circular principles and reuse. Like piecing together a puzzle, the company gathered materials from a variety of locations, such as facade panels from renovation projects in Trondheim and Oslo, concrete decks from a government building, and windows from a wrong order to Kværnerbyen. This restored and breathed new life into the property, and earned a well-deserved DOGA (Design and Architecture Norway) Medal of Honor.

55 Sept/Oct 2021

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THE LENDER’S ROLE ON THE ROAD TO NET ZERO Specialist development lender Atelier is cutting through the greenwashing noise with a new science-based offering that it hopes will substantially lower the amount of carbon from the biggest emitters in our sector Words by

BETH FISHER

T

he UK’s 2050 net zero target is not that far away, and with the built environment responsible for a vast chunk of carbon emissions, the property industry should be speeding down the road to sustainability.

However, Chris Gardner, who together with Graham Emmett founded Atelier, is adamant that take-up is nowhere near fast enough. “Residential real estate is not in a good place in terms of its journey to net zero,” he says, pointing to its high level of granularity. Most residential properties are in the hands of individuals and retrofitting them with the measures needed to reach the target is going to be “a huge economic and social challenge”, he warns.

Chris gives a hypothetical example of a 2,000-home estate in the Midlands built 25 years ago. “How are you going to get young families to invest in their properties to get them to net zero?” He’s right; it’s a tough ask. Not having a common standard for residential property developers to operate to, including how carbon is measured, is also stifling progress. “That lack of a single focus is going to be a big inhibitor to the residential market,” he asserts.

Conversely, the property market is a tale of two halves when it comes to sustainability. According to Chris, the commercial sector is miles ahead of its residential counterpart. “We’re seeing a lot of traction there. Most of the commercial real 58

Graham Emmett and Chris Gardner L-R

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“We’re in an industry that produces thousands of tonnes of concrete and steel and endless amounts of carbon through what it does”

estate market is working towards achieving carbon neutrality by 2030.” Why is that?

The majority of commercial square footage is corporately owned and operated, and it’s much easier for these institutions to align to the needs of their tenants and invest in their stock to better their carbon footprint. Atelier has recently moved into a new office space, and its landlord, for example, has an advanced plan to take its portfolio of properties to net zero. “They see that as strategically important; they’re well-funded and capitalised, and they’ve got the money and the will to do it.”

The need to focus on this environmental mission is clear. Climate change poses a real risk to property, which could indeed impact investment and lending on certain property types and in particular regions, creating scores of ‘stranded’ assets. This will mostly affect those that can’t be remediated into carbon-friendly stock, which can be due to a number of reasons—because it is inefficient to make them net zero, for example, or they are in a location that will kill the value. This is likely to become an inherent part of how the market operates and assesses property in the not-so-distant future. “Truthfully, I don’t think this is in the psyche of anyone yet,” Chris worryingly admits. By contrast, the case for slashing the carbon impact made by new homes is overwhelming; 20% of the housing stock the UK will have in 2050 has yet to be built—meaning now is the perfect time to change how residential property is delivered, funded, and managed.

But in order to see real change in the residential sector, Chris believes the role of finance will be the oil in the cogs—not the

restraint. Modern methods of construction, which are less carbon intensive, have created a whole new world of credit risk for lenders; the easiest option for financiers is to shy away and continue to plunge cash into tried-and-tested bricks and mortar.

“But we must go along with innovation,” he notes, “and not stand in the way of progress.”

To do this, we need mass adoption. “It can’t be like financial veganism; this isn’t something that’s on the periphery.”

While many lenders have recently brought out green mortgage products, Chris criticises how useful they are in the grand scheme of things, with EPC calculations focusing on a narrow description of the operational carbon a property emits. “We’ve seen mortgages where certain lenders will give you 10 basis points off the rate if it has an EPC rating of A or B—but that is simply greenwashing.You are adding nothing to the value, nor encouraging anything.

You are simply rewarding somebody for something they already have.” He also slams those that are basing their ESG plans on the “fluff around the edges”, such as how much paper is being used in their photocopiers or how to reduce the mileage of their cars.

“We’re in an industry that produces thousands of tonnes of concrete and steel and endless amounts of carbon through what it does,” Chris points out. Thus, Atelier has chosen to address the difficult problem first. It aims to materially contribute to the reduction of carbon in its day-today operations as a lender by supporting those developers that build properties more sustainably. While there are building standards from BREEAM and Passivhaus, 60

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that it costs about 11% more to build a property with very good carbon credentials,” Chris claims. To achieve this, developers will need to look at three ‘carbon levers’: how much embodied and operational carbon can be reduced, and how much carbon can be offset. With the latter, the lender will need to fund the carbon offsetting credits— something he describes as a “new world of credit risk, underwriting and legals” that the industry will have to get its head around.

Another hurdle is the current target for carbon. “We know the goal in the end is net zero, but that’s a journey,” Chris states.

Echoing the RIBA’s push for architects to introduce greener designs progressively, he adds: “You could build a net zero

he tells me that the first barrier the lender has faced is not having one practical and unified standard to help UK residential developers produce net zero property.

With this in mind, in November, Atelier will launch a radical new initiative called the Carbonlite Challenge. It will use the power of finance to get developers to create greener homes; the more sustainably they build, the lower their cost of borrowing.

Using a detailed set of benchmarks designed by the Royal Institute of British Architects (RIBA), the Carbonlite Challenge will require developers to demonstrate that their scheme adheres to strict metrics, both in terms of embodied carbon and the lifetime carbon impact. Those who meet the

“We’ve seen mortgages where certain lenders will give you 10 basis points off the rate if it has an EPC rating of A or B—but that is simply greenwashing” property today if you wanted to, but the market’s just not there yet. It would be impractical and unrealistic to do so now.”

The final challenge is encouraging developers to adopt these standards and measurements to produce properties that are carbon reductive. Atelier recognises that developing homes with improved sustainability credentials costs a lot of money, but it is committed to rewarding developers who do so. “We are going to link the amount of carbon reduction to the interest rate they pay over the life of the loan,” Chris explains.

In a nutshell, there will be carbon assessments at multiple stages, from the design phase right through to construction, carried out by Paragon Building

criteria will receive significant reductions in interest—the Atelier Carbon Success Rebate—that they can use to pay for green technology, like heat source pumps.

During the development of the initiative, Chris noted not only the difficulty of finding comparable valuation evidence for green properties, but also a clear value for the ‘green premium’, ie how much more these schemes cost to deliver than those built using conventional construction technology. That’s why Atelier has teamed up with a panel of highly respected experts in the field, including EY, Savills, and the Paragon Building Consultancy. “We know, for example, that properties with excellent green credentials make a premium of about 11% over a standard property. We also know 61

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Consultancy, to measure the impact.

As shovels hit the ground, and in parallel to usual QS activities, the third-party carbon assessor will visit the site and monitor that the developer is using the materials it said it would. At practical completion, a closing assessment will be made, which will positively impact the amount developers pay in their final interest bill on redemption, which Chris expects will be a six-figure discount.

The lender is set to start piloting this offering via three brokers, quite aptly, during COP26 in early November, with plans to deploy circa £25m of capital to developers that are looking to future-

points, from the new residents in these properties. “This isn’t about us,” Chris stresses. It’s not about “owning climate change”, it’s more about doing some of the learning for industry peers in the hope that other lenders will take similar steps.

And if it works and there’s a demonstrable reduction in carbon? Atelier will present the data to the capital markets in a bid to raise a green bond, with its eye on hundreds of millions of pounds at a lower cost.

On the question of feasibility, those that are seeking green investments and are prepared to take a slightly lower return on their money for a better quality outcome going forward could look to fund this. “We are

“You could build a net zero property today if you wanted to, but the market’s just not there yet. It would be impractical and unrealistic to do so now” proof their business. Atelier will bear the costs of the price reduction during this stage and expects borrowers to use it as a learning exercise, rather than for profitability. While the big housebuilders are likely to have sustainability functions in their operations now, it is doubtful that SME developers in the sub-£20m space will have invested in similar teams. “For once in my career, no one can claim to be an expert on this,” Chris observes.

At the end of the pilot phase in June 2022, EY, which is providing impartial oversight of the Carbonlite Challenge, will publish an open report on its progress. The analysis, which will be made available to both the government and industry, will also include feedback on the carbon-saving features, such as heat pumps, solar energy and EV

going to try to connect the investor in the pension fund or bank with the best-in-class developer,” Chris says. Atelier has engaged with both capital markets and advisory firms, and understands there is a “wall of green capital”—the supply outstrips the opportunities currently available. “Younger people are beginning to invest and want returns that aren’t just financial; they’re looking for a yield, but also other benefits.

ESG is a big part of that, and we know that market is only going to go one way.”

In as little as three years’ time, Chris predicts that building and lending in this manner will be the standard. “This won’t be a nice to have,” he cautions.

“If you want to run a lending business, you need to understand this stuff or you’re dead. This is survival.”

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63 Sept/Oct 2021

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Putting money where our mouth is

john bruton Hot on the heels of securing a quarter-of-a-million-pound cash injection from Homes England, major housing association Stonewater has issued its debut £250m ESG-accredited sustainability bond in a bid to cut carbon and build thousands of homes. We speak to executive director of finance John Bruton about how the deal is set to shore up the company’s plans to deliver more than 6,000 homes by March 2024 and ensure all its new builds are net zero from 2025

How will the sustainability bond help Stonewater reduce net carbon emissions and provide more affordable housing?

The bond will help deliver the aims outlined in our Sustainable Finance Framework (SFF), which we were among the first housing associations to publish earlier this year. We are committed to hitting the government’s target of net zero carbon by 2050 for all our properties.

Stonewater owns and manages more than 34,000 homes across England and we’ve identified £322m of qualifying assets that comply with our framework; these are split almost 50% between social or affordable housing and green buildings. Approximately 27% of the portfolio is new assets that will be built in line with the aims in the SFF; while the remainder is existing, eligible properties that will be refinanced or upgraded.

We’re also delighted to have recently been named by Homes England as one of its largest strategic partners. Working alongside Guinness, we’ve been jointly provided further funding of £250m to build 4,180

high quality, affordable homes by 2029.

This is on top of the £224m awarded to the strategic partnership by the housing body in 2018 to build 4,500 homes by 2025.

Stonewater will provide its share of these as part of the 6,000 homes we plan to deliver.

As we are a charitable housing association, our environmental and sustainability strategy is mainly focused around developing new, green, affordable, energy-efficient homes with no overall impact on the environment, while improving our existing homes to ensure they meet our ambitious targets for the benefit of all our customers.

The bond is at the heart of this.

What will you be doing to improve the energy efficiency of new developments and ensure they are able to withstand extreme weather in the future?

We’re modelling different approaches in order to develop preferred solutions for our new homes in meeting net zero carbon standards. As part of this, we are consulting with customers on what is important to them and assessing the environmental impact of 66

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“Through our partnerships with Homes England and Guinness, we’ve pledged that 25% of the properties we build will be category 1 and 2 MMC, where most of the home is constructed offsite” the materials we use. We aim for all of our new homes to be net zero from 2025.

Two examples of our updated strategy following customer feedback are planning for the increased risk of flooding and overheating. On flooding, we assess this threat for new developments and ensure attenuation measures are installed to protect our homes and avoid any negative impact on other properties in the vicinity. We’re also modelling the risk of overheating in each solution and will do our best to design this out in our new builds.

What will the Stonewater bond be used for?

Development of new affordable and sustainable housing • build 6,250 new homes in the fiveyear period until March 2024 • develop 1,500 new homes every year from 2022/23 • create strategies for sustainable procurement, waste and water management

How will you be using the bond to retrofit your existing, ageing housing stock in order to decarbonise and reduce fuel costs?

Reduce net carbon emissions • introduce a credible strategy for reducing Stonewater’s carbon emissions • have no homes with an EPC rating below Band C [SAP 69] by 2030 • reduce office carbon footprint by 33% to 81.5 tonnes per annum and business mileage carbon footprint by 33% to 482 tonnes per annum

by March 2022; compared to the financial year 2019/20

Last year, we commissioned the Institute for Public Policy Research to explore issues on decarbonising the nation’s homes.

The report found that at least 12 million homes in England need to be fitted with heat pumps, combined with new energyefficiency measures, if the country is to meet net zero by 2050 and lift thousands of households out of fuel poverty.

Investing in our existing homes is a crucial part of our corporate plan, and we will be allocating £2m specifically to decarbonisation measures, such as heat pumps and improved insulation, over the coming 68 Bridging & Commercial

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year. At present, we are exploring the best ways to do this and trialling a number of solutions in our bid to deliver sustainable homes that remain affordable to live in.

This includes our involvement with Energy Superhub Oxford (ESO), which aims to showcase an integrated approach to decarbonising power, heat and transport across Oxford. For this particular project, we’ve partnered with Kensa Contracting to have 60 of our homes at Blackbird Leys installed with its innovative low-carbon heating solution.

We’re also exploring hybrid heat pump systems as a way of transitioning away from gas central heating, as well as private electricity networks, with solar photovoltaics (PV) and batteries, where we would work with a third party to operate the network and use grid balancing, maximising the use of solar generation on site to reduce costs for customers.

As with virtually all housing providers, our banking agreements mean that any work to our properties must be covered from income.

We can carry out our current plans within that, but it does take up resources that would otherwise be spent on new homes. That is why this new bond is important to us.

How will you be implementing MMC in new developments?

We’re committed to a large proportion of Stonewater’s development programme incorporating elements of MMC. Through our partnerships with Homes England and Guinness, we’ve pledged that 25% of the properties we build will be category 1 and 2 MMC, where most of the home is constructed offsite. We’ve already made strides in this regard with projects using diverse methodologies. Our commitments will be an evolution of what we’re already doing. For instance, we are working with Ilke Homes to develop 120 modular houses at College Road in Hereford, and Boutique Modern to deliver a new scheme in Peacehaven, East Sussex. We also have a pop-up Beattie Passivhaus factory producing homes offsite for a small project in Chard, Somerset.

Innovations in areas such as heating and insulation will help to address climate change, and this is rather easier when moving away from traditional construction.

It is also easier to control quality and the level of waste in a factory environment in a way that building conventionally outdoors simply doesn’t allow. We will use our early experiences of modular to refine our designs and manufacturing techniques in order to shape the homes of the future.

How are you reducing waste sent to landfill during development and increasing the biodiversity of your projects?

We’re working with our development partners to better understand how to measure and monitor the waste on our construction sites. This will provide us with a better grasp of which materials have the largest environmental impact so we can make better choices when specifying.

As part of this work, we are striving to reduce the amount of single-use plastic on our construction sites by 50% by 2025.

Alongside this, our use of modular homes will help to reduce the amount of waste during construction due to the standardisation involved. In recognition of our work in this area, we’ve been awarded a Silver SHIFT rating—an independent assessment and accreditation scheme that measures organisations against challenging environmental targets.

In addition, Stonewater has partnered with the Community Forest Trust, planting six new trees for every home we build, including one on site. We intend to enhance biodiversity in other ways on our new housing projects, too. For example, we incorporate edible planting wherever possible.

How important do you think it is for the largest housebuilders and banks to support the nation’s drive to reduce greenhouse gas emissions and encourage smaller businesses to follow suit?

This is important, and we will continue to push ourselves and our suppliers on this agenda. We are keen to work with our partners—large and small—to share learning and experiences and drive improvements in environmental performance. We’ve recently established an environmental working group for our partners who maintain our existing homes to do just that. Also, in developing a preferred approach to build net zero homes, we aim to identify the difference in embodied carbon between various techniques and materials and will take this into account before selecting the best solution. We’re also in the process of developing a sustainable procurement policy to help minimise the environmental impact of all of our contracts.

69 Sept/Oct 2021

Full list of B&C Awards 2021 winners Best Valuation Partner

Best Bridging Broker

Best Solicitor

Regulated Bridging Broker of the Year

Specialist Product of the Year

Best Development Broker

Best Specialist Recruitment Partner

Service Excellence — Brokers

Best Technology Partner

Best Specialist Distributor

Best Bridging Broker Newcomer

Best Bridging Lender Newcomer

Best Commercial Broker

Development Lender of the Year — £10m-plus

Winner: VAS Panel Highly commended: Anderson Wilde & Harris

Winner: JMW Highly commended: Lightfoots

Winner: Funding 365 – CBILS Highly commended: Avamore Capital - Finish & Exit

Winner: City & Capital Highly commended: Valorem Partners

Winner: Nivo Highly commended: MagiClick (formerly Dock9)

Winner: Wharf Financial Highly commended: Tapton Capital

Winner: Synergy Commercial Finance Highly commended: Pilot Fish Finance

Winner: SPF Private Clients Highly commended: Adapt Finance

Winner: Brightstar Highly commended: SPF Private Clients

Winner: Arc & Co Highly commended: Sirius Property Finance

Winner: LDNfinance Highly commended: VIBE Finance

Winner: Connect for Intermediaries Highly commended: Positive Lending

Winner: Albatross Capital Highly commended: LendWell

Winner: Maslow Capital Highly commended: Shawbrook Bank

ON 6TH OCTOBER 2021, ALMOST 700 PEOPLE GATHERED TO CELEBRATE THE 13TH ANNUAL B&C AWARDS This year, we transported guests to the plains of Africa for a safari experience they’ll never forget— partly because it may have been the closest many of us have had to a holiday in ages.

If you have never been on safari before, it is a feast for the senses: flora, fauna, colours, textures, landscapes and, of course, incredible sunsets. It represents the beauty and power of the natural world. And, although nature has dealt us a difficult hand over the past 18 months, it is important to take time to revel in its splendour.

Since March 2020, the specialist finance market has proved resilient and impressive. At B&C, we are proud to have stood side by side with our clients, partners and peers as we navigated the toughest period some of us have ever experienced. Our commitment to reporting during what was a frenetic news cycle was unwavering, and it meant the world to see our dedication to this community reciprocated.

Amid all of this, 26 firms and individuals have managed to epitomise excellence in the bridging, development, and specialist banking sectors. May they continue to inspire the next generation of professionals in our space. Our judges pored over pages of submissions that, far from being overwhelming, served as a happy reminder of the spirit of our market.

The waiting list to attend the event was long, and we wanted to ensure that more people in the industry could participate in the action—especially shortlisted companies not present. Therefore, for the first time, we live streamed the B&C Awards so that people were able tune in and share their support from wherever they were.

We are extremely grateful to our main sponsor, United Trust Bank, for collaborating closely with us and helping make the day one for the books.

It was great to be back.

Development Lender of the Year — Up to £10m

Regulated Bridging Lender of the Year

Mezzanine Lender of the Year

Service Excellence — Lenders

Bridging Funding Partner of the Year

Bridging Lender of the Year

Underwriter of the Year

Editor’s Choice Award

Winner: Shawbrook Bank Highly commended: Roma Finance

Winner: Beaufort Capital Highly commended: Crowd with Us

Winner: Toorak Capital Highly commended: Shawbrook Bank

Winner: Lenka Pajkosova, MT Finance Highly commended: Samantha Williamson, Roma Finance

Lender Relationship Manager of the Year

Winner: Allegra Penny, Funding 365 Highly commended: Jamie Russell, Ortus Secured Finance

Best Specialist Bank

Winner: United Trust Bank Highly commended: Shawbrook Bank

Commercial Lender of the Year

Winner: Allica Bank Highly commended: Shawbrook Bank

Winner: United Trust Bank Highly commended: Masthaven Bank

Winner: MT Finance Highly commended: Allica Bank

Winner: Glenhawk Highly commended: MT Finance

Winner: MFS

Outstanding Contribution Award Winner: Rob Jupp

Lifetime Achievement Award Winner: Alan Cleary

Show opens at 9.30am with complimentary breakfast networking session

MOVE YOUR

Brand new visitor and exhibitor app and hybrid online expo experience – coming soon

TO THE

The Finance Professional Show 2021: Fresh challenges, new alliances and unprecedented opportunities await

MAINSTAGE CONFERENCE PROGRAMME

The FP Show is proud to host a varied, CPD-accredited, all-day conference programme, in partnership with Precise Mortgages and InterBay Commercial. Join us from 10.30am for panel debates, talks, Q&A sessions and much more.

Further details, including additional participating speakers and timings, will be announced in the coming weeks, but here is what you have to look forward to:

A subject that has been doing the rounds for the best part of a decade; is now the right time to seriously consider a formal certification that brokers can obtain in order to evidence understanding, aptitude and experience in dealing with more com plex product types?

Featuring: Brightstar, Pilot Fish Finance, Masthaven, Seddons, Precise Mortgages, Totum Finance

The Future of Work and Real Estate The main technological, enterprise and demographic trends driving the ways corporates design, consume and manage their workplaces and real estate portfolios Featuring: Owen King, Head of UK Corporate Research & Strategy at JLL

Maximising Opportunities in Buy-to-Let Featuring: Together, InterBay Commercial, Hampshire Trust Bank, Commercial Expert, Master Private Finance

Building Better and Greener A discussion on the range of property development and construction solutions that serve to remedy the housing supply issue in a more sustainable manner Featuring: Impact Lending, Uplift Finance

Brand new hall for 2021 – West Level One at Olympia

SME Business Lending Update Featuring: Just Cashflow, Allica Bank

The Rise in Regulated Bridging Featuring: MT Finance

Find out more and register to attend by visiting https://www.financeprofessionalshow.co.uk/

Proudly supported by

Check out our Product Masterclass schedule online

CELEBRATING 40 YEARS OF PROPERTY FINANCE ESTABLISHED 1981

We look for opportunities to lend rather than reasons not to As a principal development and bridging lender, MSP have the freedom and expertise to approach each project individually and use our experience in property to give you a tailored solution.

Development Funding

Bridging Loans

Lending Solutions Up To £15m

Working alongside you, we provide finance that brings your projects to life

We tailor swift solutions to keep your projects moving forward

With flexible loan terms and rates starting from just 5.99% per annum

Experience Beyond Finance

Find out how we can help mspcapital.co.uk info@mspcapital.co.uk Call us on 01202 743400 Terms & Conditions: MSP Capital is a provider of non-regulated loans against properties that are registered in England and Wales. All Offers of Finance are subject to satisfactory legal due diligence, a valuation report, ‘know your client checks’ and, for Development Finance only, the initial monitoring surveyors reports. MSP Capital Ltd. is a registered company in England & Wales. Company number: 01543169 Registered Office: MSP Capital, Strata House, 12-14 Castle Street, Poole, Dorset BH15 1BQ

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4 Switching to more plant-based diets could save up to eight million lives by 2050, reduce greenhouse gas emissions by two-thirds, and lead to healthcare-related savings, according to Oxford University research.

While all the restaurants visited on these pages offer vegan options, our editor-in-chief, Beth Fisher, has put together her favourite London-based vegan venues for anyone interested in adopting a more climate-conscious diet—and helping stop animal cruelty.

Farmacy, Notting Hill Ethods Foods, Oxford Cirus Sagar, Covent Garden Club Mexiana, Soho Unity Diner, Hoxton Wildflower, Peckham Levels Temple of Seitan, Camden Redemption, Covent Garden Purezza, Camden

By Chloe, Covent Garden

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Caroline White Photography UK

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Limelight a glimpse into our ever-busy schedule

1 Who: Hallcroft Finance Where: Burr & Co at the Kimpton Fitzroy Hotel, Russell Square What: Talking in list format only, the murky world of procuration fees and legal costs, and an exciting project aiming to combat the cladding scandal…

2 Who: Hampton Mortgage Servicing Where: Caravan, Great Portland Street What: Short-sighted bridging lenders, the repayment of government-backed loans, and why a butler sink in the shower is a prime reason not to DIY 3 Who: Master Private Finance Where: Hari Hotel Terrace, Knightsbridge What: Stories of the ‘boys club’, regulating the bridging industry and backing split proc fees, and The Lobster Pot being the best chippy 4 Who: Propdev Capital Where: The Standard Hotel Rooftop, Kings Cross What: Why contingencies apparently aren’t needed in development proposals, the need to launch a podcast, and the ‘rules’ of rooftop pool-goers 5 Who: TFG Capital Where: Brasserie of Light, Oxford Street What: The need for further education in bridging, distinguishing between earning a proc fee versus an introduction fee, and getting banned from your local pub because of your accent 6 Who: BlooddanceSF Where: SAMA Bankside, Southbank What: Raising awareness of blood donation during a time of great need, a line-up of industry DJs, and, well, dancing 7 Who: Watts Commercial Finance Where: Peckforton Castle, Cheshire What: Celebrating Watts’ 15th anniversary, debating the inclusiveness of golf days (again), and a not-so-silent fireworks display

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Diversity & Inclusion Series: Words by

caron schreuder

MFS In our second instalment of this series aimed at inspiring the industry on ways to instil D&I principles into their businesses, we talk to bridging lender MFS about cultivating a culture of diversity from inception, selecting the right recruitment partner and the ethical responsibilities that “extend well beyond making a profit”

Series

“BUSINESS LEADERS HAVE A DUTY OF CARE TO THE PEOPLE UNDER THEIR CHARGE, AS WELL AS THEIR CLIENTS, BUT ALSO TO CONSIDER THEIR ENVIRONMENTAL FOOTPRINT . . .

BRIDGING LENDERS WHO ARE ENGAGED IN D&I WILL ALSO BE CONSCIOUS OF SUSTAINABILITY”

HOW HAS MFS APPROACHED DIVERSITY AND INCLUSION, AND WHAT STAGE WOULD YOU SAY THE COMPANY IS AT FROM A LONG-TERM POINT OF VIEW? MFS had something of a head start, given that our founding members consisted of men and women from different backgrounds, which we believe has contributed to further driving this ethos in the business. It is, however, something that we’ve looked to embrace and improve over the 15 years that we’ve been operating.

We’re not perfect, but we’re proud of the inclusive culture that we’ve fostered, which encourages diversity. We’ve not approached this in a regimented, policydriven way; rather, by ensuring a diverse make-up in our teams, it is something that has evolved quite organically. Our company as a whole has a near-even split of men and women, with women holding nearly two-thirds of management positions. A further 42% of our staff come from ethnic minority backgrounds, including senior managers and directors.

There is no room for complacency, though.

We continue to listen to employees about their wants and needs, and are always considering ways to make MFS a more open, accommodating place to work regardless of gender, ethnicity or beliefs. To that end, it’s great to see D&I written and spoken about much more within the bridging space—there is a huge amount we can learn from our peers in terms of how we can boost representation and create even more inclusive working environments.

WHAT RECRUITMENT METHODS DO YOU USE? When it comes to recruitment, and HR more generally, we’ve been very particular about the agencies we work with. D&I must be as important to them as it is to us—we communicate this point very clearly.

First and foremost, the agency bases its selections on candidates’ experience and qualifications, which involves in-depth conversations to confirm they have the right skills for the role. This happens with D&I in mind, ensuring an individual is judged on merit and work ethic, not a need to fit a very monocultural environment. It includes hiring people at all stages of their careers; we are not deterred by the age of candidates.

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MFS has grown considerably over the past 18 months. In fact, in the first half of 2021, we increased our headcount by more than 40%. Meanwhile, the makeup of the team has remained extremely balanced, given that we hire new members with a keen eye on D&I—something we’re constantly evaluating. However, as we can clearly see strong representations among women and ethnic minorities within the business, particularly in senior roles, we’re confident in our approach.

Importantly, we take a wider view of what is happening around the world, and discuss trends and issues as they evolve. The risk is for the business to exist in a bubble.

Instead, we see the bigger picture and strive to do the right thing by our employees.

Fundamentally, we run as a meritocracy, meaning that every staff member is offered the same opportunity to grow and progress based on their attitude and performance.

As a result, our leadership team, which has risen through the ranks and benefited from our promote-within policy.

HOW DO YOU VIEW THE CONNECTION BETWEEN A DIVERSE WORKFORCE AND PROFITABILITY? There are many studies that show how greater diversity can boost an organisation’s productivity, whether that concerns gender or ethnicity. For MFS, however, this upside has never been a focus.

Viewing D&I in terms of productivity or output often seems crude. For us, it’s about creating a place where people want to work; in doing so, we foster a culture that brings out the best in them.Yes, that might improve staff retention or productivity, but we come at it from a more fundamental

stance of ensuring all our employees have the security of knowing they will be respected regardless of their background.

There is no question that our diversity enables us to deliver a better service to clients and brokers—it’s a beneficial by-product. For example, during the pandemic, we’ve faced many challenges in how we adapt and deliver our bridging offerings. Having a varied senior management team has meant that people approached this from different perspectives and put forward a wide range of ideas.

This helps us to innovate and find the best solutions when problems arise.

DO YOU BELIEVE D&I INTERSECTS WITH SUSTAINABILITY? To an extent. To tackle these major societal issues, companies must understand that there are more important things than turnover and revenue. Business leaders have a duty of care to the people under their charge, as well as their clients, but also to consider their environmental footprint.

It can be suggested that bridging lenders who are engaged in D&I will also be conscious of sustainability. Again, it’s about seeing the bigger picture, and appreciating that we have responsibilities that extend well beyond making a profit.

It’s also fair to say that these two topics— D&I and sustainability—will become more prominent in the years to come, and rightly so. Employees and clients alike will expect companies to have strong policies or positive track records in these areas, which should help accelerate change. Any bridging firm dragging their feet will likely become more engaged when it affects

their bottom line, even though you’d hope that action is taken long before.

WHY HAS PROGRESS BEEN RELATIVELY SLOW? The financial services industry has been relatively poor when it comes to D&I; plenty of reports confirm this. Like many sectors, it’s a victim of its age and traditions—clichés about finance companies being run by men in suits, or deals being done on golf courses, have perpetuated an image of a stuffy, outdated world that is not as progressive as it should be.

These perceptions are no longer that accurate, but the balance of the workforce in the finance space, including the bridging sector, must still be addressed. Women and ethnic minorities need to be better represented and, while progress has been made over recent years, the pace of change is not nearly fast enough.

Setting targets for board-level representation is a good thing (it’s important that earlystage companies look to build a diverse team from their first hires, rather than address this further down the line), but more granular changes must be made. For instance, introducing flexible hours for parents who need to do the school run. Or, as MFS does, celebrating many religious holidays, rather than just Christmas.

Small changes in practices and processes will help shape a more inclusive culture, allowing people from all backgrounds to enter and rise within a business.

There needs to be more conversations about what form these changes can come in, ensuring there is suitable inspiration for companies to improve.

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Series Diversity and inclusion have always been very vital to me as it represents a wide range of traits, backgrounds, and experiences. It is difficult to engage and communicate with colleagues who have different perspectives to our own if we don’t understand their viewpoints, and every organisation needs to acknowledge how essential this is for the day-to-day activities of a business.

I am from India and moved to the UK recently; London is one of the most diverse cities in the world. I was really impressed to see how MFS has a wide range of people from different backgrounds working for the company. I am eager to discover their perceptions and experiences, as varying perspectives generate a greater spectrum of input, and I believe learning about our similarities and differences can create a team that will communicate and coordinate more efficiently and add value to the organisation.

At MFS, we celebrate every occasion, whether it is a birthday or religious festival; I have never seen any organisation going to such lengths to respect every culture. My time at the company has really opened my eyes about diversity and as MFS continues to grow, I am looking forward to being a part of an even more diverse group.

Faraz Khan – Investor relations assistant

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Series Finance is seen as a heavily male dominated world. This is not the case at MFS. I feel our diversity is what makes us special and gives us a unique edge when it comes to collaboration and ideas. Not only is our team made up of almost 50% women, but many are also in senior leadership positions.

This creates a working environment where no one ever feels uncomfortable or out of place. Having multiple viewpoints is crucial to the running of a good business.

Working at MFS has made me feel like I can achieve whatever I set my mind to and I always feel fully supported not only by our CEO, but also the team.

As MFS continues to grow, we are keeping sight of our core fundamentals and culture.

Our mix of genders, nationalities, religions, and backgrounds really sets us apart. I am excited to see what the future brings.

Maria Gilbert – Executive assistant

Diversity and integration are crucial for any successful business. The evidence for this is right in front of me: take London, for example, a melting pot of hundreds of nationalities, religions, and cultures all in one big city which has ultimately become one of the heavyweight financial centres of the world.

MFS represents a variety of backgrounds.

I was raised in a Jewish household and educated at a Jewish school, but we also have Indian, Pakistani, Greek, Venezuelan members of the team, to name a few, all of whom bring their own perspectives and life experiences to the table—which means the company reflects these views. This ensures that we can provide effective solutions to our clients who similarly come from many different corners of the globe.

Craig Reiselson – Senior bridging loan underwriter

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Introducing

Driven by Relationships, Focused on Solutions Bridging and Development Lender Commercial Semi-commercial Land Development Second Charge

Foreign Nationals Accepted • Adverse Credit Considered • First Time Landlords Accepted

Nominated for Best Bridging Lender Newcomer T: 01474 550 295

E: enquiries@fairbridgecapital.co.uk

W: fairbridgecapital.co.uk

Supporting Healthcare and Hospitality businesses through the pandemic and beyond We offer secured property finance and business growth funding from £1m to £30m.

Prospect Pubs and Bars

Stay Original Company

Rhencullen Care Group

£1.8m

Deal size: £8.7m

Deal size: £2m

Summary:

Summary:

Summary:

Company, owner and operator of five freehold coaching inns throughout the South West, structured on flexible terms to refinance loans from their existing lenders, resulting in cost savings and funding to support

Rhencullen Care Group own and successfully operate three care homes in Norfolk. Cynergy Bank provided a £2m CBILS loan to refinance their existing lender and helped them to acquire the freehold of Belvoir House Carehome.

Deal size: Original Company Ltd

7M

tay

Loan 3 with flexible terms including Care Group Transaction to Stay Original Deal : Rhencullen

a significant interest only period to Prospect Pubs & Bars Ltd, an of pubs in the Home Original,operator owner and operator Counties, to help them to open a further three pubs and create c.50 new jobs.

Deal Size: £2.M Summary:

coaching inns throughout the

further capital expenditure plans.

Rhencullen Care Group own and successfully

uctured on flexible terms to

operate three care homes in Norfolk.

from their existing

Cynergy Bank provided a £2m CBILS loan

g in cost savings and funding to

to refinance their existing lender and helped them

capital expenditure plans.

to acquire the freehold of Belvoir House Carehome.

We offer secured property finance Contact and business growth financing solutions to trading SMEs from our network of offices across the UK. With our digitally enhanced relationship first approach you’re always in good hands with our accessible, knowledgeable people who understand your business and make quick decisions.

Steve Crosswell, Director Call +44 (0)7483 085 531 Email scrosswell@cynergybank.co.uk Or visit cynergybank.co.uk/commercial-banking

Cynergy Bank Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

Calls may be recorded for monitoring and training. Cynergy Bank Limited is a member of UK Finance and adheres to the Standards of Lending Practice published by the Lending Standards Board.