Alternative Lenders in UK Real Estate MarketPosted on: 5 February, 2019
Monument Real Estate can now advise clients on investment and development finance, for commercial real estate and residential portfolios, with its existing network of real estate finance lenders. We can identify potential funding options, prepare detailed financial models to assist discussions and assist in negotiation of lending terms and finance documents.
Since the start of the global financial crisis, traditional clearing banks have adopted a more cautious approach to real estate debt, fueled by the lessons learnt from the global financial crisis and greater capital regulatory requirements. Their lending criteria are focused on lower risk lending criteria, long-term underlying income and time-consuming due diligence.
Alternative lenders in the UK real estate market have seized the opportunity created by the reduced lending appetite of the traditional lenders. There is now a diverse range of funding sources for UK commercial property, ranging from private equity debt funds to challenger banks. According to the latest figures from the Cass Business School, 40% of outstanding loans are now originated from alternative finance lenders compared to less than 5% of outstanding loans a decade ago.
The approach of alternative lenders is suited to many of the value-add and core-plus opportunities identified by Monument for its investors. We have developed links with new entrants into the real estate finance sector, including challenger banks, peer-to-peer lenders and private equity debt funds. Monument now has an established network of over 70 alternative finance partners operating in the regional real estate and covering all the asset classes.
Our ever-increasing network of alternative finance lenders can offer greater leverage, quicker due diligence and more flexibility across the capital structure. Stretched senior debt, whole-loans (covering former senior and mezzanine debt), and hybrid debt structure (covering debt and preference equity) are now commonplace. These lenders will consider business plans in secondary and regional locations, with shorter underlying income and requiring development or refurbishment expenditure.