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Sam Le Pard joins the Arc & Co. team

The Arc & Co team continues to expand. Following the arrival of Tom Savill and Jeremy Robinson earlier this year, we now welcome Sam Le Pard to the Commercial and Development team.

Sam joins Arc & Co following three months of training in the Arc & Co. Academy. Sam was previously a trainee solicitor at Freshfields, working in London, Dubai and Singapore and gained a first-class history degree from the University of Nottingham. Sam’s addition enhances the range of skills and experiences in the Arc & Co team.

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The beginning of March and another new team member

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Following the arrival of Jeremy in January we are pushing ahead with our plans for growth and skills diversity with the addition of Tom Savill to the Structured and Development team.

Tom joins Arc & Co. having spent the past 6 months on our training program. Tom gained a Bachelor’s degree in business from the university of Oxford Brookes and uses the valuable skills gained from past experiences to aid and enhance the Commercial and Development team.

Lending Focus Seminar

It’s always a privilege when a team member is called upon to give his opinion on the finance market.  Taylor Wessing’s ‘Lending Focus’ series of seminars has experts from across the Taylor Wessing network presenting on a range of hot topics and market updates.  This week saw Edward Horn-Smith as the guest speaker giving a presentation entitled ‘Trends, Terms and Tensions for the mezzanine finance market’ at Taylor Wessing’s New Street Square offices in London.

Starting 2018 with continued growth

The start of 2018 is proving to be as busy as the end of 2017.  In addition to the many smaller deals that have completed this month, the £11.3 m loan for a large redevelopment in Reading is a great way to start the new year.  As we look forward to the year ahead we welcome Jeremy to the Arc & Co. team.  Jeremy is the first of several new hires that will take place as we look to not only grow the team but also to expand the skills and experience within the company.

Jeremy is a highly accomplished property lending professional with direct corporate acquisition and ownership experience over a 28 year career including spells with lenders UCB Bank Plc (a then Paribas subsidiary) and PLT Ltd. Success in residential property development and commercial investments as both owner and lender give him the expertise and understanding to provide the outstanding level of advice and service that clients require in today’s marketplace.

Market Update

Up until the last recession, developers would normally structure their debt with traditional Senior banks like Natwest, and if they needed higher leverage they would add mezzanine finance to sit behind the senior loan.

Since 2008, the traditional senior lenders have either retrenched from the market or become a lot more conservative on allowing the developer to structure mezzanine behind them. This has resulted in the emergence of new lenders who have the ability to provide whole loans, or ‘stretched facilities’.

These funders, who typically have mandates from institutional funds or family offices, have now gained a sizable market share and are becoming the market norm. These lenders will lend up to 90% of total cost at a rate of around 10-12%. If you compare that to the traditional method and calculate the blended rate of the senior loan, usually at 6% and the mezzanine loan at 16%, the blended rate is in the single digits.

We can clearly see that the market is now swinging back in favour of the traditional way of structuring and as the market becomes more competitive, rate compression is likely to
happen. On top of this, the market is seeing more willingness from senior lenders to accept mezzanine to sit behind them.

The most important part of the deal is not always the price; it is about completing the deal in a timely and cost-sensitive manner. Traditional structuring does throw in other problems that you should consider. Inter-credit deeds must be negotiated and agreed between the senior and mezzanine lenders, and on top of this your professional fees, such as for lawyers and surveyors, will be a lot higher due to two lenders being involved.

A development project very rarely runs on time. If a time extension is needed, the developer will have to negotiate with two lending parties rather than having one port of call.

To summarise, it is a positive sign that the market is seeing increased growth in development lenders and it is great to see that the traditional method of structuring debt deals is returning and expanding. Stretched lending is a good way to simplify a deal and save on fees, but most of the time will not be as cheap.

For developers, any increase in financing options available is always a positive sign, but as the market expands for both stretched and traditional financing there will be more emphasis on the broker and their quality of advice. If advised correctly, the developer can maximise their financial return by using the traditional method.

Arc & Co. advises Ktesius on landmark residential scheme in central Brighton

John Kerrigan, Director of Arc & Co. Structured Finance, has successfully advised the developer, Kteisus, on the acquisition and construction finance for the Astoria Cinema site in the heart of Brighton.  The project has full planning consent for the demolition of the existing building to create a mixed use scheme comprising of 70 private residential units, a gym, TV room, ground floor commercial space and 72 cycle spaces.

To assist the purchase and subsequent development, Arc & Co. structured a facility in excess of £20m with an institutional development funder.  This enables Ktesius to secure the site and deliver the development in 2019, forming a new mixed-use residential-led scheme which will bring vitality to the area.

John Kerrigan said: “Arc & Co. are proud to have supported Ktesius to achieve the purchase of this landmark development site in the centre of Brighton. We look forward to assisting them with their future funding requirements”.

Ken MacRae from Ktesius added: “John and the Arc & Co. team are extremely focussed and effective, and we will certainly engage them in the future to advise on debt structuring.”