Bridging & Commercial Magazine Supplement - Finish & Exit

NICHE MARKET PRODUCTS Featuring Avamore’s Finish & Exit

www.avamorecapital.com

Over the past few years, property developers have faced unexpected challenges which hinder and halt the viability of their schemes and further contributes to the UK housing crisis.

One challenge includes the uncertainty surrounding Brexit, which has continued to disrupt the development process. For example, in the Federation of Master Builders’ (FMB) Q2 2019 State of Trade Survey, it was reported that 60% of SMEs were finding it difficult to hire bricklayers and 54% were struggling to recruit carpenters and joiners. Also, a staggering 77% of builders predicted material prices to rise further this year, while 21% of employers announced a reduced workforce.

Consequently, the market is seeing construction delays and cost overruns, impacting not just the developers, but the lenders within this market.

This coincides with a slowing property market, with August 2019 being the ninth month in a row that annual house price growth remained under the 1% mark. As a result, more developers are now looking to retain their schemes to rent rather than a straightforward sale.

In 2018, the build-to-rent sector totalled £2.6bn in investment—up

11% on the previous year. With developers increasingly eyeing the rental market as a solution, this will cause a dramatic shift to their original exit plans.

Experienced developers with business plans may still get stuck on their projects, with time running out on their existing build facility and construction works yet to be completed, lenders need to be more reactive and dynamic when it comes to meeting the needs of developers.

Avamore Capital has pioneered such a solution: the Finish & Exit product. This offering is tailored for schemes which are not eligible for a traditional developer exit because the project has not been sufficiently completed. In these scenarios, Avamore offers options such as early equity releases pre-practical completion or additional liquidity to complete developments where the existing facility has expired or there is no build facility remaining.

Since this was introduced, similar product launches from other lenders suggest that the development finance market is becoming increasingly supportive of the varying hardships of today’s borrower and mitigating the resultant problems in order to keep the UK building.

“Lenders need to be more reactive and dynamic when it comes to meeting the needs of developers”

“Avamore offers options such as early equity releases pre-practical completion or additional liquidity to complete developments”

What is the Finish & Exit?

The Finish & Exit is designed for projects which are not eligible for a traditional developer exit because there are still works left to complete.

In general, the developer has either run out of their existing development finance facility and cannot gain an extension from their current lender; the development finance facility has run out so there are insufficient funds to complete the project or the developer was relying on sales proceeds to fund the project which have not come in.

What can it provide?

The Finish & Exit can provide the following:

• Funding for near

completed schemes

• Refinance of an existing

development finance facility

• Drawdown of funds to complete the development

• Time to sell the units once the development is complete

• A potential pre agreed equity release

What makes it unique?

Avamore was the first in the market to launch the Finish & Exit product.

It has always been a development finance lender and so, it has the ability to assess cases as a bridge with a ‘development lens’.

Avamore has a consistent due diligence process and depending on the level of completion, has the in-house expertise to underwrite the deal without the heavy involvement of a monitoring surveyor which means that transactions can be completed efficiently.

Avamore has no limit as to when it can step in on a part completed project; crucially schemes are not required to be wind and watertight to qualify for the Finish & Exit.

Whilst the Finish & Exit was only officially launched in 2019, Avamore has been lending on part completed schemes since inception and so, it has dealt with a broad range of scenarios. Approximately 30% of all Avamore loans have had a ‘part built’ element incorporated.

Finish & Exit Criteria

Max LTGDV

Max day 1

67.5%

70%

(including rolled up interest & fees)

(including fees)

Maximum interest

9.0%

p.a.

Minimum

ÂŁ500

Loan Term: 3-18 months | Arrangement Fee: 2.0% (includin

LTC

90%

Minimum interest

(including rolled up interest & fees)

Loan Size

0,000

7.0%

p.a.

Maximum Loan Size

ÂŁ10,000,000

ng 1% broker fee) | Location: Central & Southern England

Southampton: 95% Complete Wind & Watertight Experienced developers were working on a 101 residential unit and 3 commercial unit scheme, funds were required from Avamore to pay the existing lender and to release working capital to the developers and shareholders.

The funds also went towards outstanding snagging works and final s106 payments to the local authority. At the point of completion, 58 units had already been sold which demonstrated the liquidity of the scheme.

• Avamore Rate: 0.59% p.m. (7.1% p.a.)

• Loan Amount: £6,292,131 • Term: 6 months • LTGDV: 61.4% • GDV: £10,500,000 • LTC: 78.0% “It was an absolute pleasure working with Avamore on this transaction. Avamore are clearly experienced professionals, which shone through when dealing with any technicalities and getting over any hurdles. Avamore were able to take a commercial view on items to help get the transaction completed in a short timeframe. I would definitely recommend Avamore to others.”

Jatin Ondhia, Co-Founder & CEO, Shojin Property Partners

Hackney: 65% Complete Not Wind & Watertight Avamore stepped in to support experienced borrowers on a mixed use scheme comprised of residential flats and additional office space.

The borrowers faced unexpected construction delays causing them to run out of time on their existing development finance facility.

Avamore stepped in and took comfort from the strong borrower experience and the liquidity of the residential market in Hackney.

• Avamore Rate: 0.67% p.m. (8.04% p.a.)

• Loan Amount: £4,617,644 • Term: 15 months • LTGDV: 57.0% • GDV: £8,100,000 • LTC: 75.7% “Avamore took on a difficult case both in terms of execution but also in terms of working to a tight deadline. The team’s dedication to ensuring completion of the loan despite challenges was refreshing. The team at Avamore are well resourced but equally full of knowledgeable professionals that were a joy to work with. We hope to do more with this group.”

Piragash Sivanesan, Founder, Totum Finance

Contact ANDREAS YIANNI Relationship Manager e. ay@avamorecapital.com t. 0788 881 4001

CHRIS TREADWELL Relationship Manager e. ct@avamorecapital.com t. 0776 066 7104