Refinance Options to Support Developers Through Covid-19 Fallout

Posted by Krios Capital Partners on 14th May 2020 -

As Covid-19 sweeps through the globe, the real estate debt market (as many other components of the economy) is experiencing a sharp slowdown and showing signs of potential weakness, a new research has found.

According to Cass Business School UK’s Commercial Real Estate Lending Report, between £8bn to £10bn of loan write-offs and debt losses are expected due to coronavirus, as well as an additional £22bn of development loans are forecast to be affected by construction delays and defaults.

Additionally, many property development finance lenders may not be able to support existing clients and schemes as their investors might be demanding their money back or current credit lines are not being extended by their existing banks.

In light of the above, some private debt lenders had no other choice than to pull out from the market and focus on managing their existing loan book in the short-term leaving some of their clients with no other alternative than to refinance.

WHAT ARE THE POTENTIAL REFINANCE OPTIONS IN TODAY’S MARKET?

Finish and Exit development finance

Suitable for part-built residential schemes which do not qualify for an exit development bridge since practical completion is yet to reached.

Some lenders do offer a development finance facility to support part-built projects which have been delayed and are therefore running out of time with their existing development finance facility.

This facility allows developers to refinance their existing development finance facility, continue the development whilst providing extra time to devise the appropriate exit strategy without the stress of default risk.

Exit development finance

Once a development reaches practical completion, the borrower can exit the development facility and transfer onto a development exit development bridge which offers significant flexible repayment terms so developers can pursue the most appropriate marketing strategy for the scheme.

Additionally, where development finance can be relatively expensive, a development exit loan can be used to reduce finance costs to a lower rate since the project is de-risked and release equity that can be redeployed towards new projects or used for working capital purposes.

ABOUT US

Krios Capital Partners are a London based property finance boutique providing bespoke funding solutions for real estate whether it is the acquisition of a property, the recapitalisation of a portfolio or property development.

Our aim is to provide a one-stop-shop solution for property investors and developers seeking finance to enable speed of execution, a seamless process and, more importantly, a successful funding journey.

Should you have any funding requirements or just want to talk to a member of our team, please get in touch today.