Why deals continue in a challenging market

Despite a rocky end to 2022 and yet more economic pressure this year, deal activity in the property market remains strong. The role of specialist lenders is crucial in maintaining financial certainty and confidence among borrowers.

As its team expands in line with growth in demand, MSP Capital’s Head of Broker Relations Arian Manouchehri and Associate Director of Credit Lee Merrifield explain why market challenges produce opportunities in their wake.

Successful entrepreneurs unlock opportunities even when times are tough. ‘No guts, no glory’, is an oft-quoted maxim about the mindset behind taking calculated risks. It’s an especially relevant thought for the property market right now as it responds to the challenges of through-the-roof inflation, dramatic spikes in interest rates, rising energy costs, and supply chain disruption.

When it comes to providing finance for property projects, heightened caution among banks and traditional lenders means borrowers can more easily fall foul of changing risk profiles, and so be turned down.

This void has created opportunities for specialist, more nimble lenders with a thorough understanding of the market and an appetite for being innovative.

A prime example is MSP Capital, a fixed-rate lender of both development and bridging finance. The 42-year old specialist is on track for more growth amid a big rise in demand from housing developers and other borrowers. It has doubled the value of its loan book in just two years, supporting many much-needed projects across the south. Success has also won the Poole-based firm successive Non-Bank Lender of the Year awards at the Solent Deals Awards 2022 and 2023.

“The key benefit a lender such as MSP Capital provides clients, is to offer certainty and confidence at a time when base rates have been increasing and adding to cost inflation.”

“It’s all about delivering the safe, robust financial strategies that help make development projects a reality on the ground,” explains Arian, an expert in debt structuring and helping to solve complex funding requirements.

“We see growing demand for both development and bridging finance. Most clients are in the residential market but there is keen interest among commercial property developers too. We have an experienced team and a robust infrastructure able to process high levels of volume in the market. We are known for our speed of decision-making and delivery of funds. Our autonomy as a principal lender means we can lend on the basis of sound underwriting logic but always with an entrepreneurial, solutions-driven approach that makes transactions more efficient and easier for the client.”

Arian’s views are shared by Lee, a chartered banker whose career experience includes 28 years at top-five high-street bank NatWest.

“With 42 years in business, the team at MSP Capital have weathered many economic storms,”

says Lee. “In recent times, the firm navigated the impact of the pandemic and is well placed to continue supporting clients during the period of high inflation we see now.

“We know the property industry well and we can offer our clients the certainty they need when the markets are changing.”

“Despite the post-pandemic climate, we’ve remained flexible and agile when it comes to our clients’ needs and been able to say ‘yes’ to more clients than ever before, supporting worthy businesses and addressing the ongoing UK housing shortage by making more development projects a reality.

“We have increased our team of property professionals, including underwriters,
valuers, compliance managers and analysts, by over 40% to support the business growth.”

“This expansion means we can make sure we continue to offer clients the kind of relationship-led lending that we are so proud of. As a result, clients keep returning to us to fund their next projects.”

Previously a Senior Analyst at the firm, Arian says specialist lenders are essential to the property industry in good times and bad. He has identified a clear market trend in more clients seeking alternative sources of bridging and development finance in the past year.

“There has been a steady retreat from mainstream, high street lenders,” says Arian. “Interest rate challenges have especially affected the buy-to-let (BTL) market, presenting opportunities for specialists like us to step in with a short-term lending solution when borrowers have been let down by a previous BTL lender.

“When borrowers have a positive experience and feel looked after, they are more likely to recommend us and we expect that to be a continuing factor for the foreseeable future.

“At our core we are a relationship-led business. That’s why we have so much repeat and referral business. Clients like to come back and keep working with us.

“We care about the people we do business with. That’s what makes the good specialist lender stand out from the regular lender.

“We aim to look after people as best we can, get rid of red tape that adds no value and focus on the salient and commercial points of the deal.” 

Asked about wider property market trends, both Arian and Lee acknowledge the huge challenges in the economy but feel the picture for development finance remains robust.

“I am cautiously optimistic based on our experience,” says Arian. “Loan redemptions, sales and market activity to the end buyer and deal flow are all very much present. From the loan applications we are seeing, it is clear that demand from developers continues to be strong.

“We have always prided ourselves on safe underwriting. That is a constant for us. On loan sizes, we will fund up to £20 million but the bulk of our businesses is sub £5 million. We are very confident on that part of the market where there are a lot of excellent opportunities.

“One of our biggest USPs is that we enable certainty of funds because everyone sits in the same office together and can make real time decisions collectively that we will stand by. That level of certainty is a hugely powerful advantage for borrowers.”

As a final thought, Arian feels “consistency and doing things well’ is even more important in times of economic pressure. “If you are predictable, reliable and steadfast, the customer knows where they stand. Opportunities are created on the back of that in both good and challenging times. We’re not swinging the risk dial up and down in a haphazard and unpredictable manner. In times of economic uncertainty, the value of that is even greater than in benign market conditions.”

Discover more at mspcapital.co.uk