Property development and coronavirus
The challenging times in which we currently find ourselves equally extends across the property development and construction sector and many of our clients are seeking assurances from funders, contractors, supply chain and professional support services.
Looking at the bigger picture and in the context of Government announcements there clearly is confusion around whether development sites should / can remain open and, even if the response is in the affirmative, whether ‘safe’ progress on sites can continue to be supported by contractors and the supply chain, who in turn are influenced by availability of staff and the moral responsibility to staff health.
We have seen announcements from a number of major housebuilders that they are closing down sites and also from main contractors adopting a similar stance. Sadly however many SME developers and self-employed trades have been in the difficult position of ‘no work means no income’ and the anticipated Government announcement hopefully will provide clarity around income support for the self-employed.
From a development funding perspective the response is mixed with some funders ‘remaining open’, albeit clearly under review on a weekly and possibly daily basis, and others having paused for new lending. External influences include a spike in demand for investor withdrawals across a number of the Peer to Peer lending platforms and the simple practical and logistical issues around being able to undertake normal operations whilst remote working and the ability for valuers and project monitors to attend sites safely. The bottom line seems to be the application of a common sense approach for schemes in build and to continue funding whilst progress on site continues, if at all possible. Many developers seem to be taking a natural pause to putting a spade in the ground on new developments but progressing due diligence so they can be live when conditions improve. Our advice is to speak to your individual lender and agree a sensible strategy.
Cashflow will become a pressing issue for many SME developers and contractors and whilst the Government has announced business support via the CBILS scheme this should not be seen as the free handout that many may have interpreted. Participating lenders will still be applying normal lending decisions against their historic appetite for the sector. Equally it is important to understand that businesses will remain liable for the whole loan amount and asset security may still be required. It remains early days but current feedback is lenders are looking to be supportive and will consider applications for support (whether under the CBILS scheme or not) on a case by case basis. Again our advice is to speak to your existing Bank Relationship Manager as soon as possible and be armed with the necessary supporting information / cashflows to make your business case. Other alternative options also may be available through the many short term / bridging lenders in the marketplace who historically have been geared up to act quickly.
Cowgills have a dedicated Property and Construction team who are on hand to assist. For advice do not hesitate to contact David Rainford on 01204 414243.
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