Catherine Spode


Richard Norton

CS Richard, I understand that you, as a brokerage, are on the panel of approved brokers with a number of the development lenders .What does this mean for  companies applying for funding?

RN As you know, all funding institutions cherry pick; they want the first class applications, and, by having approved brokers on the panel, they know they will be the first to see the  best applications.

CS So the applicant is advised of the lender's specific requirements.

RN Yes, and  this is recognition of the hard work we put in,  ensuring the appraisals are at the very exacting standard required.

CS You mentioned earlier that there is an advantage in that the development lenders are deposit taking banks

RN The best development lenders have a very high reputation, often offering  funding in a variety of sectors. Their key point is that a deposit taking bank has funds in place, and are ready for allocation by the Committee.

CS Does that mean that the funds are allocated and then  “pegged” or ring fenced for the particular project?

RN Yes, so, if the project is for, say, £20m, and the offer is, for the sake of argument, 7% over an 18 month period,  the rate offered and the term are held, even though the cash would be drawn down in a number of tranches, as work is completed.

CS So the developer can plan ahead, knowing the cost of borrowing from that senior debt provider right through to completion?

RN Yes, and that is important for the construction company and suppliers to know.

CS I note you are insisting on a good contingency margin

RN. Yes, we are looking at 10% as a minimum. We do have to expect rising costs which are difficult to foresee.

CS People often ask me, “What are your rates? How do you go about answering that one?

RN Well, first of all, I explain that we look at the deal as a whole – our service is to save time for the developer by arranging the whole funding stack, consisting  of senior debt, bridging and mezzanine if necessary,  and an equity partner if needed.

CS Yes, that really is the key service for the applicant – it saves the time needed to put the different deals and parties together

RN  It is important to know what each of the development lenders will support. Some offer funds only to experienced developers, so there is no point in first time developers applying.

CS So you would know which banks will support first time applicants?

RN Yes, there are banks which will support, for example, construction companies who are tackling their own project for the first time.

CS Will the rates offered to first time developers be different to those offered to seasoned developers?

RN Yes, of course, for a less experienced developer, there is greater risk if things go wrong, so there would tend to be a slightly higher rate

CS Does the quality of the project and the track record of the team affect the rate?

RN Yes, however,  we are not going to put forward a senior debt offer – or even the whole stack – which would leave the Directors’ bones bleaching in the sand.

CS So you would have to factor in the rates on any mezzanine and equity to calculate the overall rate?

RN Yes, those funding types would be secondary to the senior debt funder in a worst case scenario,  so they are, naturally, more expensive on rate.

CS So, really, you would have to look at the actual rate for the given project at the point when the last unit is sold and all equity/profit share paid out?

RN Yes. There is also the matter of overrun, and, indeed, more rarely, early redemption to be taken into consideration.

CS Is there often a penalty for overrun?

RN Yes, if it goes beyond the term on the contract, there are,  naturally,  the extra months to calculate, and also, in the small print, there can be a penalty fee.

CS So a three  month overrun could be very expensive

RN Yes. What we do is look at the overall deal, and that includes the small print, which is where the penalty clauses are usually hidden. I spend some of my time doing that, and ensure the applicant is aware.

CS And you also ensure the parties are kept up to date with the overall deal and how it is progressing, thereby preventing part of it from slip sliding away?

RN Exactly. The overall success of the developer is our success. We aim to be standing by ready for their next project.

CS Thank you, Richard.


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