Davon May Update
As 2017 marches on, it is proving to be as interesting times as ever.
Since our last email update at the beginning of the year, we have had the continuing farce that is the Donald Trump presidency, endless commentary about Brexit and the likely effects on the UK, be they good, bad or indifferent. Continuing tensions in many locations globally and a UK general election in a few weeks’ time….all exciting and interesting if not more than a little scary at times!
In terms of the property industry, we have of course had one of the largest gatherings of UK property professionals at the annual MIPIM event in sunny Cannes, South of France. The general sentiment at the event seemed positive, mixed with a healthy dash of realism and caution and as Davon we certainly found the event productive as well as enjoyable.
For the fourth year running at MIPIM, we co-hosted a drinks event on the Wednesday evening alongside Jackson Stops Staff and BLP Insurance and were delighted with the turnout and the mix of guests that attended. Thank you to those of you that could join us and we look forward to perhaps welcoming those of you yet to attend next year. Our event certainly seems to be established as a key meeting place for those involved in development in the UK and grows in numbers each year.
In terms of the funding market, it of course continues to evolve. Indeed, with nearly thirty years of experience in funding, I think it is fair to say that the continual changes in the market since the credit crunch of 2008 stands out as being far more pronounced than at any other time in Davon’s existence.
We continue to see new lenders entering the market and existing lenders adapting terms and some lenders leaving the marketplace. We suspect this will only continue for the foreseeable future where so many active lenders are “non-bank lenders”, often backed by private equity which usually comes with a defined target life for their investment.
From a borrower’s perspective, this continually changing market certainly makes it more challenging for developers to be aware of the funding options that exist and even harder to compare offerings that can vary substantially in both structure and terms.
These fundamental changes within the market have no doubt contributed to us continuing to see very strong levels of activity in all aspects of Davon’s activities, be it the structuring of funding with third party lenders and investors for all types of projects or the provision of mezzanine finance for residential developments.
Indeed, on the mezzanine lending side, the combined loan books of our two lending platforms, Davon Investments and Strata, include projects across many location in England with our typical loan sizes ranging from £100k to £2.5m per transaction.
There continues to be an increasing level of interest from a wide range of developers in using mezzanine with borrowers appreciating it can prove an extremely efficient way of minimising equity required for projects.
For instance, whilst we often provide our facility at the outset of the project, we are just as happy to be brought in at any stage of construction, subject to the metrics and nature of the scheme. Our facilities are flexible, so if a borrower has surplus cash available from say another completed scheme, our lending can be repaid in whole or part.
Either way, a borrower can further increase the return on their capital invested.
Having been active in the mezzanine space for over a decade, we have made a concerted effort to keep our offering simple and flexible. Our key benefit is allowing developers to minimise the capital invested in any one scheme, enabling their equity to be spread across a wider range of opportunities.
We are particularly proud of the high percentage of repeat customers we have in our loan book, many having multiple loans with us at any one time.
Likewise, the relationship that Davon has with the senior debt lenders we work with allow us to ensure the combination of debt and mezzanine work seamlessly as a package. In the right circumstances this relationship also assists with the re-gearing of the debt facility at a later stage of a scheme allowing for the early repayment of the mezzanine and in turn reducing the funding cost for borrowers.
With lending at the heart of what we do at Davon, we are also very proud to have actively commenced lending in a completely different arena. That of lending to less privileged entrepreneurs in the developing world through one of our chosen corporate charities, Deki – www.deki.org.uk
Deki’s aim is to assist people in the developing world to help themselves by starting or growing a business that can sustain them and their families and reduce or remove entirely their reliance on outside financial assistance. We believe very strongly in what Deki is seeking to achieve and accordingly would encourage you to involved.
As always, we look forward to the coming few months and the excitement they will no doubt bring and to continuing to assist our clients, existing and new, with their funding needs.
In the meanwhile, enjoy the better weather (when it arrives) and we look forward to having the opportunity of speaking with you soon.
- 0118 978 3955