Thistle Finance

Development lenders entering Scotland should seek a guide



The Scottish development market is currently heating up.

There is huge potential for specialist lenders north of the border — but going it alone without a guiding ally could prove a risky venture.

For example, lenders testing the waters of a new market often rely on existing partnerships with England-based law firms to see them through. But while Scotland’s legal system is equally as complex as England’s, it is completely different.

Much the same applies to a lender's distribution and introducer strategies when moving north: a London-based packager or distributor will not have the same expertise and on-ground knowledge as one based north of the border.

With the Scottish property market going from strength to strength — and with swathes of land available — developers are constantly on the look out for funding partners.

Whether they're focused on office-to-resi conversions, mixed-use schemes, commercial or residential developments, it's not especially difficult — if they have a decent track record — to find funding to support these.

There were 18,750 residential new builds completed across all sectors in Scotland in the year ending September 2018, a 4% (or 635-home) rise on the previous year.

In addition, there were 19,900 all sector new-build starts in the same period, representing a 2% rise compared with the previous year (19,493). These figures highlight the ravenous appetite for housebuilding in Scotland.

This may be an obvious point, but when lenders are entering the Scottish market, they should play it safe for a while before they find their feet. Entering the market is all well and good, but growing a high-quality and sustainable loan book should be their main target.

One potential way to do this is to look at JV options with experienced developers — and a decent packager will have all the contacts and experience to make that happen and do the necessary introductions.

Yes, lenders are hungry to get money into the Scottish market, but they need to stay on top of their risk, too — and so forming relationships with experienced and successful developers is key.


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