Whisper it gently, but overseas capital is knocking on Britain’s door once again.
With the Bank of England holding interest rates at their lowest level in centuries, and Britain’s economy still feeling the effects of one of the sharpest contractions on record, global capital’s sudden interest in the UK may seem premature.
The reality is many financial institutions went fully ‘risk-off’ during the pandemic and built-up large cash reserves as a result. With confidence in a recovery and risk appetite increasing, these global institutions have quickly come to realise that the UK (and UK residential property sector in particular) is a very attractive place to deploy their capital.
The Three Bs – Backing Britain’s Builders
The success of Britain’s vaccine roll-out and stability in the UK housing market following the pandemic’s arrival have made British housebuilders an appealing prospect for global investors looking for strong returns from the anticipated recovery.
We’ve seen this appetite first-hand at Atelier, and during Q2-21 we secured significant additional funds from three leading financial institutions, including a major US investment bank. Our increased lending firepower means we’re now on course to deliver more than £300m to real estate investors and developers across the UK in the year ahead.
One legacy of the financial crash of 2008 was that the major banks pulled out of the development space altogether and, in the most part, the intervening years have seen enough uncertainty to keep them on the side-lines. You’d often hear it said that these larger institutions ‘won’t get out of bed for a development loan sub-£50m’ and lenders like Atelier have played a key role in bridging that gap.
However, after a long hiatus, and as we finally emerge from the pandemic, it seems development finance is slowly coming back in vogue among the financial titans. Perhaps not by way of direct lending to borrowers, but instead by backing high-quality alternative finance providers, as we have just experienced at Atelier. This show of faith in the market and our business should not be underestimated and it’s our job to ensure we deliver on our end of the bargain by deploying these funds efficiently by Backing Britain’s Builders.
Safe hands when deploying capital
The renewed appetite does not come without caveats of course. And when it comes to deploying capital in specialist sectors like development finance, the banks are keener than ever to have external experts in place to do the heavy lifting for them.
This dynamic plays perfectly to Atelier’s strengths. Our team of seasoned property professionals enables us to source and execute the best opportunities quickly and reliably, providing our stakeholders with a steady flow of high-quality investments, all backed by first-charge real estate assets.
M&G Investments has been an Atelier partner from day one, and we built our business to the exacting standards expected by such institutional investors. But the structure we created – which combines strong liquidity with a flexible capital base – also makes us a powerful, responsive partner for the investors and developers to whom we lend.
Our new funding partnerships, coupled with our excellent redemption track record, give us additional dry powder and flexibility on how we choose to fund deals. Brokers and developers are already noticing the difference – we’re as fast and reliable as ever, but with an even greater appetite to grow our book and complete on the right development and bridging loans.
By scaling up and diversifying our balance sheet we’ve reduced our cost of capital, meaning we can offer even more competitive pricing on the right deals, where lower risk warrants lower rates.
Not just a lender
The Atelier vision was always for us to be more than just a lender. We choose the schemes we lend on very carefully, focusing on the usual fundamentals but also those that deliver beneficial Environmental, Social and Governance (ESG) outcomes. We fund homes that aren’t just bricks and mortar, but which also make a positive impact on their local communities.
We’re also more than a lender when it comes to our financial backers. We’re a platform that links global institutional investors to the UK’s most forward-thinking housebuilders.
Britain’s much needed housebuilding boom means demand for finance from developers is surging, just as the appetite among major financial institutions to get in on the act picks up.
Atelier is proud to be connecting the two and unlocking the power of global capital to build more, and better, homes in Britain.
By Paul Silva, Chief Financial Officer, Atelier Capital Partners