Talking directly to your bank? No thanks, I’ll use my broker!

Written by Andy Elley

How businesses and commercial property investors have given up talking directly to their bank and are using brokers to find them a better deal—with the same lender!

2018 was an interesting year and no doubt 2019 will see one or two new challenges, particularly around investor confidence. Let’s not mention the word Brexit too much, albeit the impact has been widely felt.

Uncertainty in any market also creates opportunity and true business people have found such opportunities. We know this because in the second half of 2018 our commercial mortgage desk was busier than ever.

In particular, we have seen an increase in enquiries from clients who are struggling to negotiate suitable finance from their own bank and have asked us to negotiate for them. In fact, the more transactions we complete and the more we publicise these completed deals, the more this type of business flows in!

And we love it because we are all about finding solutions and adding value. Our Wilmslow office has been particularly busy with southern investment monies heading north where yield and value are evident. So much so, that we have employed an additional commercial broker, Robin Tait who has wide-ranging experience and abilities.

Down south in our Kings Hill office, we’ve welcomed Glenn Franklin-Jones who joins us from Barclays and Asad Khan, who makes the move across from our residential desk to ensure that we can give our clients the support they need.

So, going back to the market, in my opinion the valuers seem to have caught a cold! Their commercial valuations have pages of commentary dedicated to the Brexit position. This does nothing to instil confidence as lenders and underwriters listen to valuers. In 2018 we saw a raft of ‘down valuations’ particularly in the South East and South West regions.

Valuers can be like referees – their decision is final, although we have successfully challenged a few decisions. On the flip side of a down valuation, some clients have been able to negotiate the purchase price downwards particularly where vendors really need to sell. If Brexit is sorted this year and business confidence returns maybe the purchaser of the property will have got themselves a true bargain!

2018 was been dominated by new lenders coming to market, particularly in the SPV property holding company sector. But it’s tough out there, and unfortunately one of those new commercial lenders has gone out of business.

Some very respected lenders have pulled out of the commercial market for new-to-bank applicants, citing staffing issues and inability to convert the new business! Yes really! There is no doubt in my mind that there is a shortage of both quality commercial underwriters and business managers. But don’t panic—we have plenty of contacts and are well placed to service your needs.

So what commercial mortgage investments do we believe will do well in 2019?

Semi-commercial property because lower stamp duty and closures in the retail / restaurant sector are creating opportunity.

Holiday lets. I champion this sector and the growth has been phenomenal because of the strength of the pound, staycationers, tax efficiencies and great yield potential, plus the British summertime weather has been better—the only reason to thank global warming!

Businesses looking to finance their premises. We’ve seen a rise in the number of older property professionals selling off their commercial investments giving their tenants first refusal on the freehold.

Commercial to residential conversions and properties requiring a little TLC, e.g. with refurbishment to let loans.

Other sectors are trickier but doable for the right proposition.