Acre Lane CEO urges brokers to consider development exit loans early to offer developers 'more control'

Acre Lane Capital CEO, Ian Wilson, predicts that there is a risk of a “significant downturn” and suggested that brokers look to get development exit loans in place for their clients once they are essentially at wind and watertight level.

The comment was made during an exclusive filmed interview with DFT when Ian was asked at what stage brokers should be considering development exit loan options for their client, where necessary.

The most common causes for development exit loans have been down to some lenders which stopped making drawdowns during the first lockdown, in addition to time and money overruns, according to Ian.

He said that, as a result of the Brexit deal, there have been delays to getting EU-sourced goods.

He claimed that, if a developer experiences material and labour shortages during the life of their loan, they are often only given a one- to three-month extension from their existing lender.

“The biggest risk [to developers] is they don’t get given the time to sell their units in an orderly manner,” he stated.

He warned that a receiver could then be appointed, and units could be sold at auction at a substantial discount to market value.

To avoid this, he believes development exit finance offerings should be considered early.

“There will be a material change in interest rate from the development finance that they originally got,” he added, explaining that when taking into account any additional fees with the new lender, it should still be at no cost over the term of the project.

“…If they can do that, this is definitely the most prudent course of action.

“They are putting themselves into a position where they are more in control of the outcome.”

However, he told DFT that, over the past six months, enquiries into Acre Lane Capital for development exit loans have largely been put off until developers are at practical completion, but more are now starting to look at it earlier.

In December, the specialist lender launched three development exit products: from either DPC, wind and watertight, or practical completion.

Last month, Acre Lane Capital expanded the range with a new serviced development exit offering to provide additional flexibility and more funding on day one.  

The business has also confirmed it is set to enter the mezzanine lending market within the next few months. 

The full interview can be viewed, below.

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