Each month Fairhurst Estates examine areas impacting on the Commercial Property market; this month John Thornley, Managing Director of Fairhurst Estates invites Dave Rainford, Property Finance Director, Cowgill Holloway LLP, to share his views and opinions on the subject of Commercial Property Finance.
John Thornley (left) is Managing Director of Fairhurst Estates Ltd
jh: In your view, what are the greatest challenges in securing funding within the
sector today?
“Whilst arguably there are more funders in the market than ever before it remains
exceptionally difficult to match clients funding requirements to lenders, who as a
result of the credit crunch remain cautious and have rigid lending criteria. Equally
many borrowers are still dealing with the consequences of yield shift and the
impact on Loan to Values coupled with refinance strategies being promoted by
several banks (who have taken the decision to reduce their property exposures or
exit the market entirely)”.
In a sector where high street lenders are looking for safe commercial property lends with strong covenants on long leases the market continues to see tenants driving more flexible lease terms with shorter terms or break options.
jh: What steps can be taken to alleviate the concerns of the lenders?
“There is much to be said for a diverse portfolio with a spread of tenants and income streams which, by its very nature, will yield substantially more than a 25 year lease to a high street supermarket.
“Thankfully some lenders are beginning to appreciate that strong cash-flows can be a positive over a single property / single tenant risk profile. With a quality management team, a good track record on letting and occupancy rates, and well located property we are seeing deals being done”.
jh: What areas within the commercial property sector are showing positive signs?
“Industrial is very much back in favour as vacant possession values hold up well against investment yields and as an economy we are seeing an uplift in tenant and purchaser demand for competitively priced units.
“Equally there is no reason why a well located property in an area of strong demand but with, say, only 5 years left on a tenant lease cannot attract funder interest”.
jh: What about the ratio between ‘Loan-to-Values’?
“Admittedly Loan to Values have reduced since the mid 90’s and, whilst the majority of lenders are invariably seeking amortising rather than interest only loans, options do exist for the right transactions or for slightly higher pricing”.
Many of the transactions which are coming to market are crying out for an entrepreneurial approach to property management to realise added value opportunities and experienced operators are making good returns. David believes that Fairhurst Estates Ltd have a wealth of experience in this area and provide innovative solutions to such opportunities.
“It’s back to the property and market fundamentals alongside experienced borrowers, with a well-structured presentation to the right funder being the key to success”.
Cowgill Holloway’s Property Finance team is headed by Dave Rainford who has 20 years banking experience coupled with 3 years working for a property investment/development business.
Find out more about Fairhurst Estates at www.fairhurst-estates.co.uk
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