How the specialist development finance market has turned a corner

There's a change in sentiment and new optimism, says CEO

How the specialist development finance market has turned a corner

The specialist development finance market has started to turn after a challenging period in which it effectively ‘froze’, according to a lending executive.

Yann Murciano (pictured), CEO at lender BLEND, identifies a new market optimism, and is hopeful that an anticipated Bank of England (BoE) rate decrease will boost confidence still further over the next year.

“The mini budget, the rise in interest rates, the skyrocketing in cost of building materials, the overall economic uncertainty,” said Murciano, “all of those had a negative impact on the market and on property developers’ mood.

“At some point, the market totally froze, and we saw developers almost paralysed – no one wanted to go ahead and start development schemes, waiting for the dust to settle and sentiment to improve. But the market has now started to turn, and we are certainly seeing a change in sentiment.

“We are seeing developers once again being optimistic about the future. Especially considering that those starting a scheme now will finish it in circa 18 months and they are expecting the market to have considerably improved by then.”

He continued: “In Q4 2023, we had our biggest quarter ever of lending, and now the year has started on a very strong note, we are seeing many deals and good deals, and we are keen to continue lending and supporting property developers.

“The market is now pricing the first BoE rate decrease for May/June and that will further boost sentiment. So, I am very optimistic that the market will continue to improve.”

What new property development schemes are being funded?

In Q4 2023, BLEND funded a variety of property development schemes, from high-end schemes such as the conversion of a Grade II listed property into three residential units in Saffron Walden, to the development of a site into 21 residential units in Bexhill on Sea and the development of 14 apartments in Devon.

“We fund small and medium-size experience property developers who are building residential accommodation across the UK,” Murciano told Mortgage Introducer. “We are very much a boutique lender, nimble but highly specialist.

“I founded BLEND in 2018 and we’ve been lending since. I’m happy to say that throughout all these years, we’ve never had to appoint a receiver on our borrowers and the developers we work with, and that really tells you about the spirit of how we work at BLEND and what sets us apart. We work with our borrowers to see them succeed, never against them.

“We want to build a relationship with them and be their lender for the long run. So, whenever our borrowers face challenges - everyone does at one point or another - we work with them to help them resolve those challenges, we put forward solutions.”

Read more: “The government needs to do more to support housebuilders”

How important is it for lenders to support developers?

Murciano noted that over this recent economically challenging period, he has heard of and seen many developers who were left out in the cold by their lenders when things got difficult.

“Supporting your customer when things are tough helps you build a relationship for life,” he said. “Everyone wants to be around you when things are doing well, but it’s when things get tough that you see who remains there to support you.

“Planning has been and remains one of the key issues that our customers, property developers, face. So, we would like to see politicians, whoever comes to power next, take bold steps to resolve our broken planning system and put together the foundations of the next wave of housebuilding so that together, we can start to tackle the housing crisis. We are keen to deploy funding, but we need the help of politicians to help developers tackle the planning issues.”

BLEND announced last month that it had secured a new institutional funding line worth over £50 million, to offer bridging to property developers.

“It is very important to continuously evolve and expand our product range in line with the needs of the market,” said Murciano. “For example, we have just launched a new bridge product that’s targeted at those developers who have faced challenges in their schemes, are coming to the end of their facilities but facing lender fatigue from their lenders.

“So, we launched this new bridge product to support those developers and help them carry their projects until they are able to achieve a good exit at a good price, rather than having to sell fast to repay their lender.”

How important, then, is BLEND’s relationship with brokers?

“It is very important,” Murciano confirmed. “We work with a range of sophisticated brokers and are keen to keep building that relationship.”