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F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
Overview of North West Fundi...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
Upbeat Market Indicators
• I...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
Lenders – Key Trends
• Posit...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
Benefits of Bridging and Spe...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
Medium term options
• Strong...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
Residential Development
• Im...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
Investment
Focus:
Management...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
On the horizon
Increased com...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
Alternative Funding Sources
...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
BPRA (Business Premises Reno...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
Pooled Investment (including...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
Pooled Investment (including...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
R&D Tax Relief
R&D Case Stud...
F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y
For more information, please...
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Place AGM 2014: David Rainford and Stuart Stead

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David Rainford, property finance director, and Stuart Stead, partner and head of property and construction, Cowgill Holloway

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Place AGM 2014: David Rainford and Stuart Stead

  1. 1. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y Overview of North West Funding Market Place North West AGM Thursday 22 May 2014 David Rainford Property Finance Director Stuart Stead Head of Property & Construction
  2. 2. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y Upbeat Market Indicators • Increase in developer activity • Distressed portfolios stabilised • Greater valuation consensus • Strong PRS demand • Increase in transactions from Q4 2013
  3. 3. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y Lenders – Key Trends • Positive signs from high street lenders • Growth aspirations from challenger banks • Higher profile of specialist lenders • Investors and funders seeing increased value in the region • Bridging – new entrants, downward pressure on pricing
  4. 4. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y Benefits of Bridging and Specialist Lenders – Securing the Opportunity • Quick decisions & premium price v lost opportunity • Improved chance of success against a cash buyer • Loan to Value (LTV) driven (asset rich but cash poor businesses able to compete) • Exit strategy as opposed to day one income (capitalise on added value/asset management plays) • Distressed portfolios/part built schemes • Deliverable short term exit plan is essential Example £750k facility for NW land acquisition Zoned for residential 50% loan to purchase 1.5% fee in/out, 1.5% pcm Example £1900k facility (inc. VAT bridge) London land acquisition Planning for hotel Discussions with end user but not secure 50% LTV, 1% fee, 0.95% pcm. Ratcheted exit fee starting at 1%.
  5. 5. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y Medium term options • Strong asset play but risk profile outside traditional lending parameters • Fund appetite for target debt £5m on 3-5 years • Stretched Senior Debt or Mezzanine • Up to 85% Loan to Value • Lender Target return 11-15% with element of profit share Works for: High yielding portfolios and pre-let developments Acquisitions, refinance or recapitalisation Examples: £3m mezzanine facility for student accommodation portfolio at 75% LTV, interest 8.5% above libor, 5 year term Equity release from high yielding industrial portfolio to assist with further acquisition
  6. 6. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y Residential Development • Improving market • Downward pressure on bridging rates • Greater recognition of planning gain/land value in lieu of cash equity • Forward funding and pre-sale options • Government support • Specialist lenders – flexibility Examples: £1.8m facility, 12 houses in Cumbria 65% land value and development cost (85% + of hard cost), 3.25% / Base, 0.75% fee, 1.25% exit Facility £3.84m, houses in South Cheshire 75% LTC / 60% GDV, interest rate 8.5% fee 1.5% / 1% exit on GDV BUT – demand for funding still outstripping availability
  7. 7. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y Investment Focus: Management experience Net income/interest cover Portfolio spread/occupancy Investment yield Larger portfolios: £10m+ debt, 65% LTV, interest only 5-10 year terms swapped libor +2.5-4% Benefits: longer term commitment interest only releases cash for further investment Example: Residential Investment £6m facility for student and residential portfolio in Manchester LTV at 70%, margin 3.25% 20 year term Commercial Development – remains difficult without pre-let/pre-sale Example: Commercial Investment £7.7 million facility to South Manchester office portfolio – multi let, LTV at 60%, margin 3.5%, Exit LTV 55% at end of year 5. £1.7M Facility – Wigan mixed use – Multi Let/Local covenant, 60% LTV, 50% facility interest only / 50% amortising over 15 years.
  8. 8. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y On the horizon Increased competition – both appetite for transaction and pricing. New fund entrants for commercial investment Greater choice for North West development as funders target outside London Backing experience as opposed to lending by numbers Challenges Demand v Supply High street appetite for speculative development Interest rate increases
  9. 9. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y Alternative Funding Sources Individual Investors/High Net Worth Individuals • Relationships take time to build • Dependent on attitude to risk and reward Pooled Investments – FCA/EU regulation • Increasingly a burden • Tarred with the same brush as fraudulent schemes • But works well with business premises renovation allowance (BPRA) and traditional capital allowances • Investor expectations tend to be lower but higher fees to implement structure Forward Funding Agreements • Pre-lets to strong covenants • Reputable contractor and robust development process required The Taxman • BPRA • R&D Tax Relief
  10. 10. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y BPRA (Business Premises Renovation Allowance) • Assisted areas to include many Manchester wards, including the city centre • 100% tax relief on renovations to business premises • Will help to bring back buildings into use for commercial development only • Building must have been empty for at least 12 months • Five year hold period Coming this summer to Manchester *Subject to EU approval
  11. 11. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y Pooled Investment (including BPRA) and forward funding Structure Bank Pooled Investment Developer with Site Fund HMRC Example Land Cost £3m Construction £9m Other £1m Total £13m Dev Profit £2m Price to Fund £15m
  12. 12. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y Pooled Investment (including BPRA) and forward funding Bank £7.5m 50% HMRC (£9m & 45%) £4.05m 27% Pooled Investment £3.45m 23% Total £15m 100% Possible Funding Structure if acquired by a Collective Investment Scheme
  13. 13. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y R&D Tax Relief R&D Case Study Urban Regen We reviewed all contracts undertaken Identified potential qualifying projects Reported to HMRC Negotiations with HMRC Secured six figure TAX REFUND for client The Basics For every £ of qualifying expenditure receive 45p back from HMRC. It doesn’t have to be rocket science…
  14. 14. F U N D I N G • D E B T A D V I S O R Y • S T R U C T U R I N G / TA X • A C C O U N TA N C Y For more information, please contact… Stuart Stead Head of Property & Construction 07890 181 116 stuart.stead@cowgills.co.uk David Rainford Property Finance Director 07794 490 682 david.rainford@cowgills.co.uk Regency House 45-51 Chorley New Road Bolton BL1 4QR 01204 414 243 6th Floor, Sunlight House Quay Street Manchester M3 3JZ 0161 527 1200 5th Floor, Yorkshire House 18 Chapel Street Liverpool L3 9AG 0151 255 2727 Follow us @CowgillProperty

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