How Impact Capital’s new lending arm will finance sustainable development

The UK investor’s new debt business will promote modular construction methods through its financing deals.

Impact Capital Group, the UK-based property and construction firm founded by real estate entrepreneur Robert Whitton, has branched into debt by adding Impact Lending to its offering – a development finance business which will include a product range dedicated to sustainable construction.

The lending business, which was founded by Whitton and David Travers in 2019 as Hambros Secured Lending, has been rebranded and brought within the Impact Group.

Through its ‘sustainable construction’ product, borrowers are encouraged to use the group’s in-house modular construction contractor. Funding for eligible sustainable schemes will be available from £500,000 to £15 million (€579,000 to €17million).

Impact Lending will also provide finance to schemes to be developed using traditional construction products. It will provide stretch senior, mezzanine and bridging finance.

Whitton, the group’s chief executive, and David Travers, chief executive of Impact Lending, spoke to Real Estate Capital about the company’s ‘unique’ funding range.  

Why do you claim this product range is unique?

Whitton: ‘The sustainable construction product range is the first of its kind in the development finance industry’

Whitton: The sustainable construction product range is the first of its kind in the development finance industry. To qualify, a client must engage with our in-house contractor for modular development, Impact Modular, as the main contractor and manufacturer of its modular units. However, this requirement is preferable, not mandatory. If the borrower approaches us with a specific arrangement already in place, we are happy to consider that as a lender.

How much of a focus will sustainable development be?

Travers: Sustainable finance is the company’s focus. We want to help the transition of the industry by encouraging all our clients to consider building using sustainable construction methods on their future developments.

Whitton: Bringing Impact Lending into the group means that we can provide a holistic solution, by catering for the end-to-end lifecycle of future developments that will benefit generations for years to come.

Are you planning to encourage borrowers to use sustainable construction methods by offering them economic incentives?  

Travers: ‘We are also encouraging developers that have land to use our modular construction tool’

Travers: We are offering a higher loan-to-cost in our sustainable loan products that can be as high as 100 percent. In our traditional range, we would normally offer up to 90 percent LTC. We are also encouraging developers that have land to use our modular construction tool.

How is the debt structured to have a sustainable impact?

Travers: The finance is sustainable because it is designed either to fund modular construction or to finance sustainable schemes that meet specific environmental criteria, such as the BREEAM or the LEED certificates.

Whitton: Impact Lending’s main goal is to contribute to the decarbonisation of real estate construction.

There are not many lenders funding modular construction because they are not familiar with the product, which is why we are trying to fill this gap by bringing together the product manufacturer and a specialist lender to fund it.

Why is modular construction beneficial for the environment?

Travers: The modular construction approach – in which a building’s large-scale modularised components are prefabricated in an offsite manufacturing facility for rapid assembly onsite – can deliver greater environmental and social sustainability benefits than conventional construction. Material waste and carbon footprint can be both reduced by 90 percent while operational energy can be cut by 78 percent. Materials used for modular units, like insulation on the walls, are also good for the environment.

Whitton: Additionally, the build programme can be delivered much quicker because everything is pre-engineered in a factory and delivered to the site, so transport movements also get reduced. Costs therefore can be lower. We think this is the future of construction. Governments, supra-governmental bodies and the Future Homes Standard [UK Building Regulations] are all pushing in this direction because there is an urgency to decarbonise our economy and housing plays a big part of that.