Real Estate Finance –
Expert view: Financing your growing property portfolio
Arbuthnot Latham banker, Gary Moore and advisor, Stuart Bradney have worked together for many years. Their relationship-led approach helps them treat each client individually, creating a solution that works for all parties.
Stuart: As a real estate funding adviser, there is a sweet spot in the real estate finance sector for a truly relationship based advisory service as opposed a transactional approach to providing debt. We want to work with all kinds of clients, of course, but I have often found that owner-managed firms are those looking for the strongest business relationships. They take a long-term approach and that is how I like to work.
It is an important consideration for a property investor: what are you looking for when you are financing a project? What factors are a priority now and over the long term and how we best understand our client’s needs. This is where a relationship is key as opposed to an ad hoc transactional approach to a deal. For some, especially those with smaller portfolios that do not have complex needs, the high street might be the right place to go. The rate of interest as well as leverage is clearly important, but there are other crucial factors. It is important that the client gets sign posted to the most appropriate route to finance.
When you are looking to grow your portfolio, you need a proactive lender that understands your strategy as there is no “one-size-fits-all" approach.
Gary: When Stuart refers a client to us, it is because he appreciates the bespoke service that we offer him as a client and in turn the clients he introduces to AL.
Property investors and the portfolios they have grown over time have different funding requirements depending on the type of portfolio they hold and how they want to maximise the potential from their portfolio. When introduced to the Arbuthnot Latham Real Estate Team, Stuart and his Team know that they are dealing with a wealth of experience and with individuals who will endeavour to structure a deal that meets the client’s specific needs and helps these clients grow their business.
At Arbuthnot Latham, we like working with advisors like Stuart because we both take a very hands-on approach. We know that when Stuart introduces a client to us, there is a strong relationship with both us and the client already – we have hit the ground running and all aspects of the transaction are joined up. Efficiency and speed underpin the entire process.
Which is the best bank for real estate investors?
Stuart: There is no answer to the question of which is the best bank for real estate investors because every business and investor are different; they have unique needs and as such require different solutions. Personalities come into play as well. Matching the right personality of both the client and banker is very important.
There are a few constants, of course: you want a smooth transaction, good levels of communication, there are inevitably challenges that are faced throughout the process, but we need to know that there is a constant desire to move forward and a pragmatic approach to get things done. And of course, for the deal to be completed quickly.
Gary: At Arbuthnot Latham, we like to understand our clients’ business. We take time to get to know them and their goals. We do not have a set product offering; therefore, we are able to structure bespoke deals that match a client’s specific needs. Also, because of our experience and expertise in the Real Estate Sector, we can structure a funding solution that will meet the client’s requirements. Clients appreciate that due to our understanding of the Real Estate Market we can communicate with them with confidence which gives them the comfort we have the ability to support them in the growth of their business.
This can be beneficial when problems arise because our decisions are made at a human level. If we have worked with a client for a long time, we know how they work, we build a relationship with the client and earn their trust. The client then sees us as part of their team.
How can landlords get property financing?
Stuart: If you are speaking to an adviser like myself, then I feel you are off to a good start. An advisor will help you look at your existing arrangements from a holistic perspective and help decide if they are currently working for you. We always look to maintain existing lending relationships wherever possible. And if we exhaust all options, then of course we will broker new ones. Brokers get a fee for introducing a client to a new lender but we will only do that if it is right for you, the client. Often the best deal is with the client’s current provider. We will help support the new transaction by negotiating on rates and fees with the lender but also help the banker manage the process with those involved, be that the valuers, lawyers, or accountants.
You need to trust your adviser, they are there to look after your best interests, so be open and upfront about what you want. We are a professional advisory outfit, and we know what we are doing. You would not go to an accountant or a lawyer and then disregard their advice; it is the same with us.
As we introduce you to the lender, we will provide an executive summary of your business and deal lending proposal which includes the salient points of the deal in hand. The lender will look at the whole picture: property, information about the client, income and how the loan will be serviced. We need as much detail as possible from the outset.
Gary: Once an experienced adviser like Stuart links the client with Arbuthnot Latham, the key going forward for any investor is transparency. The best way of getting a deal done is to have a frank and open discussion from the outset. The information required to get a deal approved is relayed to the client at the beginning and the reasons why we need that information. This is usually financial accounts, bank statements, assets, and liabilities, etc.
Also, what is important to both the client and Stuart is a quick decision, whether a yes or a no. If the latter, we maybe can offer a deal but structured in a different way or perhaps at a different level of debt from which was originally requested.
How do real estate investors benefit from relationship-led banking?
Stuart: A relationship-led approach means you can have a grown-up conversation about a sophisticated solution from a position of strength, as you know the client requirements and background.
This is not a race to the bottom in terms of pricing, it is a race to the finish line in terms of deliverability, because delays kill deals and relationships. Pricing is invariably not the most important factor in a property deal, deliverability and communication are. A relationship based on honesty and accountability will underpin these points.
Gary: And if we can do a deal, we will set up an all-party call early on, so everyone (valuers, lawyers, bank, and adviser) understands the parameters of the deal, timelines, etc. It makes the whole process much easier to manage.
Stuart: Yes, I believe an all-parties call at the outset is fundamentally important so there is accountability for all everyone involved in the transaction. For me, a key to the relationship-led approach is flexibility. Arbuthnot Latham are not product-driven, they also have sensible stress tests and covenants.
Gary: We try to be more inventive. We have policies, but we are not policy-driven, so we can mould a solution. If the deal makes sense from a credit perspective and our risk/reward is matched, there is no reason we cannot work on a bespoke deal. For example, we can offer a client a combination of a fixed and a variable rate, blending the client’s risk appetite against potential rate increases.
Stuart: There is definitely a very strong market for buy to let landlords who may have a smaller holding and are possibly looking for a more retail offering with lower interest rates, in both Limited Company and personal names.
If you want a more pragmatic lending relationship with an ability to understand the bigger picture and a desire to knock down the hurdles, and a team who are prepared to listen, then Arbuthnot are definitely a good place to start.
Becoming a client
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