New entrant is latest to target development debt gap

Glenhawk, the newest start-up in the UK short-term property lending space, is aiming to raise €100m of capital.

Glenhawk, a London-based bridging finance provider, is the latest start-up to target the gap in the UK market for short-term property finance focused on developments.

The company was founded by former property developer Guy Harrington and counts Harry Hill, a founder of online real estate portal Rightmove and former Countrywide chief executive, as non-executive director.

By mid-January, the Mayfair-based firm was working to deploy almost half of its own equity capital, raised from UK-based investors and totalling £50 million (€57 million). Glenhawk is currently in negotiations to source an additional funding line of £100 million from a senior debt provider.

“We are underwriting £23 million worth of loans as of today and it’s been so busy that we are having to hire another underwriter to keep up with the demand,” Harrington, the firm’s chief executive and founder, tells Real Estate Capital.

Glenhawk is providing loans from £300,000 to £5 million on residential or commercial property assets with a minimum term of three months and a maximum of 18 months, with loan-to-value ratios in the range of 70 percent.

More than half of Glenhawk’s loans in the pipeline are linked to property development, a sector that Harrington argues is experiencing a shortage of debt finance as banks are “relatively slow” to provide funding due to regulatory requirements, with the average agreement taking up to three months. “There’s a gap in the market for lenders like us that can be a lot quicker,” he adds.

A handful of established specialist short-term lenders are already operating in the UK. Firms such as Amicus, Octopus or West One are benefiting from the lack of appetite from larger lending organisations to fund the niche end of the UK real estate lending market.

Providing debt financing for smaller schemes to property companies, private equity companies and private individuals, these specialist lenders cater for investors involved in time-pressured deals or those aiming to fund transitional properties that do not benefit from the income streams bank lenders tend to require.

Although there has been an uptick in liquidity of development finance in the UK, with 23 percent of all new origination going to this segment in H1 2017, according to De Montfort University’s latest report, many lenders remain unwilling to take advantage of development lending’s risk-return opportunities.

“There is still aversion in the market. Traditionally, banks have been the most active players but, with slotting regulation and lower leverage points, they find it harder to finance developments, especially if they have not been materially de-risked,” Andrew Antoniades, head of debt investment advisory at CBRE Capital Advisors, told Real Estate Capital in November.

Specialist lenders are filling the gap in the market to a degree, Antoniades noted, but they are not set to replace the overall liquidity that banks used to provide, which means that there is still a significant need for development finance in the UK market.

“I founded Glenhawk because I’ve been there,” says Harrington. “I’ve been a client and used short-term finance myself, so know exactly what a developer needs from a short-term finance partner.”

The firm charges no admin or exit fees – an approach that has already led to “substantial” early interest, Harrington says.

“Clients find the way we charge our fees very attractive. Also, we calculate our loan interest on a day-to-day basis as opposed to monthly,” Harrington explained, noting that the firm has already priced residential bridging loans at 5 percent, compared with the market average of around 6 percent.