Q1: As a property developer, how do I navigate the headwinds of cost inflation, rising interest rates and falling asset values?
A. In these market conditions, finding the correct form of development financing can be challenging but is manageable. As we have found through our market engagements, a well-crafted pitch and a targeted financing process can unearth unexpected sources of competitive and flexible capital.
We advise keeping your existing lenders close (and informed), being flexible, preparing the details well ahead of time and staying on top of the market.
Q2: As a property owner, how do I deal with the increasing demands of environmental, social and corporate governance (ESG)?
A. The rise of ESG is driving change in how and to whom finance is allocated in UK property. ESG compliance is becoming increasingly important, with regulations likely to impact the letting of existing stock. Investors in properties that don’t have high BREEAM ratings will need to finance capex to achieve 'green premiums' or face 'brown discounts' that could reduce portfolio values.
We advise swimming with the flow. Understand what your tenants and lenders require and prioritise sustainability and social responsibility in your operations and property portfolios.
Q3: As a property investor, how do I plot a course through the refinancing maelstrom?
A. For investors with debt facilities maturing in the next 12-24 months, we would advocate a clear and executable strategy for refinancing and managing debt covenants to be agreed upon early with lenders. Depending on their exposure to property or wholesale funding markets, existing lenders may no longer be willing to provide competitive financing terms, so alternative sources of finance may be necessary.
We always advocate strategic thinking and exploring the market early to ensure all available options are considered, including whether an element of balance sheet restructuring or new capital raising is required.