Place AGM: Funding and investment improving
More than 120 professionals from the region's property industry joined Place North West for its state-of-the-region conference at The Lowry.
Welcomed by Richard Hamilton, real estate partner at event co-sponsor Davis Blank Furniss, the audience heard from keynote speakers John Young, North West Agent for the Bank of England; Dan Crossley, partner at WHR Property Consultants; David Rainford, property finance director at Cowgill Holloway Property & Construction; Matt Crompton, joint managing director of Muse Developments; and Tim Heatley, director of Capital & Centric.
WHR's Crossley said the supply and demand balance is set to tip in favour of development as we head into 2014 due to a lack of available stock. The return of investors is making the market feel more stable and optimistic, but new supply would be key to underpinning recent gains, he told the conference.
Likening the North West scene to having the X-Factor, Crossley said the region was performing well compared to other parts of the UK and would prove a worthy alternative to London for international investors seeking better yields than those available in the overheated capital.
Crossley explained: "Manchester is seeing more demand than the other six big regional cities, it is the only one seeing rental growth.
"Manchester has a global brand thanks to football, strong government support and leadership. Investors looking at London are seeing low yields there and so Manchester is very much on their radar. Take One Angel Square, the £150m sale and leaseback we worked on for the Co-operative Group. The interest that came in for that was global, there was a very encouraging reaction."
Crossley said institutional investors from the UK and abroad were starting to come back into the market. Some were even prepared to look slightly higher up the risk curve than the rock-solid supermarket and long-lease quality covenant assets.
"Demand is back in town. It's not at levels that's going to change the world right now, but we saw a very confident last quarter and institutions coming back through. We've even seen the return of best bids, a phrase not heard for a very long time.
"Big sheds are proving very popular with the investors but there's been no new speculative development of more than 100,000 sq ft since 2008 and they are in particular short supply.
"There's also a lack of new office space. The demand is there, whether we see the supply coming back through is another thing."
David Rainford, property finance director at Cowgill Holloway, said funding was available but the issue was no longer necessarily about location, location, location but rather presentation.
"What's important is to know your lender, make sure you're talking to one that understands the specific market. A decent price can be achieved by putting forward a good argument.
"Put together a proper proposal, address credit issues before they raise them, put forward a solution, prove your track record and demonstrate credibility."
Rainford said developers should be looking beyond the traditional bank names and considering new entrants to the market such as Handlesbanken, and alternative funders like insurers, entrepreneurs, cash rich individuals, and even other developers willing to enter into JVs. Targeting banks with a track record for supporting particular sectors is another tip, reducing the chance of being knocked back further down the line.
He continued: "Lenders are open for business, the challenge is fitting the deal to the right lender, high street banks are not really on the table, but there are options. There can be sector caps and geographic restrictions, some only look at deals above £1m. They are very selective, and very much biased to London and the South East, and will be looking for strong track records and some will want personal guarantees."
He said residential investment was currently seeing most opportunities, with student accommodation also popular with lenders where deals had been done with universities. For commercial development pre-lets or sales were essential.
Rainford said: "There is frustration from developers; they don't know who is open for business, some feel they're going to meetings simply so the bank can put a tick in the box. There are hurdles to overcome, there's no doubt, but there are deals being done in the North West."
Place AGM was sponsored by Davis Blank Furniss, Cowgill Holloway Property & Construction and WHR Property Consultants.