EG FINANCE & INVESTMENT SUMMIT: What are the challenges of lending to private sector schemes in the regions?
Roman Kogan, managing director, Deutsche Bank AG London, which has recently funded a PRS scheme in Manchester, said PRS in the regions is difficult to underwrite.
“Especially in the regions, the quality of the new stock that’s getting built is of considerably higher quality then the existing stock and it’s probably going to go at a premium rent but there are no comparables,” he said. “So it’s a view that a lender has to believe.”
Catherine Webster, Quintain’s strategic finance and investment director, who oversaw the £800m refinancing for its Wembley Park development in November, said: “PRS is seen as speculative development… and when you look to the regions the air is very thin, and that’s really where the Homes & Communities Agency comes in and helps a lot of people.”
She added: “I still think the regions are incredibly tough on the funding side. London is a different kettle of fish.” She said lenders tended to be cautious about the sector because its gross to net was “unproven” and cap rates are low.
In 2016, RBS committed to investing £1bn in “new rental homes” to diversify the market. Stephen Bullock, head of large corporates, real estate structuring and analysis, Natwest and RBS Real Estate Finance, said he thought lending appetite has improved as the understanding of the PRS market has increased. “There isn’t a massive amount of data so you have to have faith in the proposition,” he said.
Listen to the full podcast from the summit here
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