Private investor celebrates £100m worth of SME loans two years after launch

Downing Development Finance (DDF) has committed secured loans of over £100m to SME property developers in less than two years since launch.

DDF focuses on making secured loans to property developers delivering residential-led schemes across the country.

To date, the DDF team has committed funding across 37 deals and worked with over 25 developers since its launch in December 2017.

Parik Chandra, partner and head of property finance at Downing LLP, spoke about the company’s approach: “This is funding which will have a tangible impact in the real economy, facilitating the development of around 500 units and delivering family housing across the UK.

“While market conditions are more challenging than they were a year ago, reaching the £100m milestone in these conditions demonstrates our desire and ability to lend through market cycles.

“A significant driver of our success, and something that also sets us apart from other funders, is that we genuinely invest across the UK instead of being too London-centric.”

DDF has provided funding for developers in parts of the UK where mainstream funding is not generally an option, and current sites being funded include ones in Belfast; Devon; Somerset; Liverpool; and Stockton-on-Tees.

The most recent deals include a £4.2m development facility for the construction of 19 units in Gloucester. Typically, DDF lends between £1m and £10m.

Parik added: “Traditional, large scale, banks pulled out of the sub £10m end of the property development market as a result of the financial crisis and, where they do lend, they do so at very conservative leverage levels which is largely inappropriate for most SME developers in the regions.

“While this may have driven some developers towards alternative financing options, there are many players in this field and not all lenders will be suitable for all schemes.

“Many lenders are volume driven which may create problems including higher default rates and liquidity crunches in a downturn.”

He concluded with his views on Brexit and the ever-changing economy: “We are not volume-driven, as many funders in this space are, and based on current market conditions we expect to commit around £100m over the next 12 months.

“The uncertainty around Brexit and the repercussions of our withdrawal from the EU are likely to persist, so there will continue to be an element of risk in the sector.

“In this environment, inevitably, some loans will enter distress, however with a well-diversified book, I genuinely believe we have one of the best teams and one of the best performing books in the market.”

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