Public sector funding in the residential real estate development market has significantly increased in recent years. At a national level, Homes England has led the charge alongside regional bodies such as the Greater London Authority (GLA). This demonstrates government’s drive to facilitate housing delivery.
Borrowers benefit from the transformative power of these bodies using their heft to unlock housing delivery. From my experience as a lender and a borrower, I can share insight from both perspectives.
As a lender, I worked with the developer Pocket Living. The GLA provided Pocket with flexible funding to facilitate its delivery of affordable micro-homes. As Pocket grew, the GLA’s assistance morphed into a jumbo £150m revolving loan with Homes England and Lloyds Bank also providing flexible funding to help Pocket deliver 1,000 homes.
Working on the borrower side, I helped Apex Airspace, a pioneer in airspace residential development, close two funding lines. First, Homes England, seeing the potential of an SME developing rooftops using modern methods of construction, provided £8.9m of funding to help Apex deliver 80 homes.
Secondly, the GLA provided Apex with a £10m revolving development loan to help it deliver 500 new homes for Londoners. The loan covered the first 25% of cost, the proviso being that 50% of homes built would be affordable. Indeed, the GLA’s support went beyond funding as the deputy mayor hosted the launch event at City Hall, which involved 30 London boroughs.
These are powerful examples of the catalytic power of positive government intervention, emphasising the willingness of the public sector to drive delivery and support schemes with borrowers of all hues.
As for the deal experience, I found both Homes England and the GLA innovative, supportive, cost-effective and willing to go where others might not. Both were reassuringly disciplined in their diligence process, with structures designed to anticipate and mitigate risk.
Thankfully, today’s market involves many active lenders operating with a broad spectrum of appetite from plain vanilla, lowly geared pre-let development lending to bespoke land acquisition or bridging facilities. This provides borrowers with choice and liquidity.
Some lenders have initiatives with Homes England. Lloyds Bank and the Housing Growth Partnership is one example, as is Barclays’ £1bn joint lending commitment. Other lenders, such as Urban Exposure, support housing delivery using a flexible and innovative approach, partnering with scale investors to add liquidity.
To sum up, government, be it Homes England, the GLA or others, working with lenders, has proved it can unlock housing delivery. However, choosing an experienced lender that can manage complexity, understand nuance and be there through a development project remains important for borrowers.
Graeme Alfille-Cook is chief strategy officer at Urban Exposure
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