Randeesh Sandhu of Urban Exposure will be speaking at an event organised by Henry Stewart tomorrow. “Raising and Structuring Property Finance” will be held at the Mayfair Conference Centre, and take a comprehensive look into the state of the current financing market, covering topics such as;

• Sources, purposes, criteria, amounts and terms
• Funding for investment, development and trading
• Financing commercial owner occupation
• Utilising Finance Brokers – who, why and how
• Accessing bridging finance
• Refinancing existing funding
• Securing joint venture and mezzanine finance
• Hedging for risk reduction

Randeesh will be speaking on the topic of “Finance for Residential and Commercial development”.  Randeesh commented, “The continued global and domestic economic crisis has prolonged uncertainty in financing markets, in addition new regulation has impacted banks’ ability to lend. Developers looking for finance in today’s market face fewer lenders actively lending and increased pricing – making it difficult to find and undertake developments that are economically attractive. A reduction in loan-to-cost ratios means developers have to find significantly more capital to contribute than before the crisis.” Randeesh continued, “Lenders have shifted focus in terms of sectors, regions, property category and borrower type. Lending criteria is more stringent, with increased security and guarantees required from borrowers. This has resulted in developments being delayed and/or alternative sources of finance being sought. Only developers who come up with creative solutions to sourcing liquidity will survive and succeed”.

Randeesh will take delegates through the latest trends in commercial and residential development finance and his predictions for the future. He will provide details of who is lending and on what terms – banks, institutions and other private sector sources.

Randeesh will be joined by a panel of market experts including, Peter Stoughton-Harris, Managing Director, European Valuations, DTZ, Philip Johnston, Joint Head of Hotels Division, Savills Commercial Limited, Will Tilbury, Relationship Director, Real Estate London and the South East, Santander, and Robin Hubbard, Executive Director, CBRE.

Tickets are still available, for further details and a full programme click on the following links;

How to book

Programme

Speakers

Pricing

Venue

CPD

Timings

According to the latest Savills quarterly report: Prime London Residential Markets, the vast majority of investors are foreign nationals, making up more than half of the buyers in London’s most exclusive residential locations:

“Some 58% of buyers were foreign nationals, with over one in five buying for investment.  Less than half of buyers were acquiring property for use as their main residence and British buyers accounted for less than half of all purchases.”

Key London boroughs are still enjoying an increase in values, although across the South West and East of the city prices are stabilising. Prime markets subject to domestic demand are showing on average lower levels of price growth than those where overseas equity dominates.  It remains true however that prime London is still enjoying a relatively resilient market when compared to broader mainstream UK property, as observed by Savills of sales completed within PCL:

“Within prime South West London, values rose by 1.3% in the quarter, taking annual price growth to 7.1%. This continued price growth has been underpinned by low levels of available stock. Those households selling prime family homes in the area are tending to recycle their housing wealth locally rather than make a move into the commuter belt.”

In terms of sales price to asking price ratios, South West London experienced 95%, east of the City 94%, and North London’s prime markets (including Hampstead and Islington) saw sale prices average 1% to 2% above the original asking price in the third quarter of this year, up to the end of September.

However in terms of price growth over the quarter, North London experienced zero growth, compared with 0.8% in East London and 1.3% in the South West, but as Urban Exposure’s Daljit Sandhu observes, North London is likely to see gains by the end of the year: “prime areas in North London are definitely strengthening based on a ripple effect of buyers being pushed out into other areas, and developers raising the bar with the products they’re now producing to fulfil such interest.”

Daljit Sandhu goes on to explain that in areas seeing high demand, prices are exceeding the value of the property, as vendors look to maximise on potential returns:

“There is probably some over-pricing in South West London with buyers trying to take advantage of the buoyant market and capitalise on foreign demand.  Vendors look at the record prices being achieved at schemes like One Hyde Park and probably raise their sales prices thinking they can ride on the back of the market impact.”

Urban Exposure provide mezzanine funding to high-end residential developers in London and the South East http://www.urbanexposureuk.com/en/finance/mezzanine-finance/

A more in-depth review of the data generated by the Savills PCL index, shows that over the same period, the top 10% with the highest price growth achieved an astonishing 151% increase, while the bottom 10% recorded respectable, but far less exponential growth of 42% in comparison.

Breaking these figures down further reveals the dichotomy between existing prices per square foot within PCL.  In 2005 it was reported that average prices were between £900 and £1,000 per square foot, but the latest figures from Savills now show the polarisation between the higher and lower end of PCL; ranging from £1,400 to £2,350 on average, a significant disparity, demonstrating that the top 10% of properties marketed in prime central London are outstripping the prices of the other 90% within the same sector.

As Lucian Cook of Savills research explains: “this analysis suggests that investors in prime central London need to look beyond the headline averages for real comparables in order to understand value.  The extent of the divergence in performance is too big to ignore”.  According to news site Property Wire, there are three key areas, in particular Mayfair, that have proved to be the most expensive, appealing to wealthy buyers and investors because of their range of improved amenities:

“Mayfair has shown the sharpest growth in the past six years, up by 117% on average, followed by Marylebone at 107% and Knightsbridge at 93%. This price growth puts Mayfair in third place on values, with average values at £1,960 per square foot, behind Knightsbridge at £2,007 and Belgravia at £1,982.”

Although the index only incorporates resale values, and excludes properties marketed under new build schemes, it provides an insight into general market conditions within PCL, and more specifically the existence of another asset class within this particular market, as the growth demonstrated by the top 10% within this sector continues, seemingly unchecked.

As Daljit Sandhu from Urban Exposure goes on to explain:

“We have looked at a number of projects in Mayfair for example, and generally concur with the price increases recorded by Savills; but even in this relatively small location of the market, there’s a good part – in and around Mount Street, and a secondary market, in and around Shepherds Market.”

Daljit Sandhu is a Director at Urban Exposure, who specialise in providing mezzanine finance, for more information visit: http://www.urbanexposureuk.com/en/finance/mezzanine-finance/

In view of the Greek decision, Cameron’s attempts to keep calls for a referendum on the UK’s policy on the European Union at bay will no doubt prove more difficult. Urban Exposure’s Randeesh Sandhu comments: “the implications of Greece returning a no vote would be profound, and the fallout felt across Global markets, this would take the debate wide open in the UK”.

But despite fragility across EU economies and the unity of the European Union currently at an all-time low, investment volumes within the Eurozone have, surprisingly, demonstrated an increase: recorded at €28.8 billion.

The latest figures from commercial real estate brokers and consultants Cushman & Wakefield show a marked rise in the proportion of international buyers, with trading volumes up across European property investment markets, reportedly by as much as 5% on the previous quarter, with a 12.3% rise in the last year, demonstrating that values are stable, despite general speculation that ‘the bubble will burst’, markets have remained resilient.

According to the head of European Capital Markets at Cushman & Wakefield, Michael Rhydderch, commercial property in particular is proving a particularly lucrative investment class:

“If anything, property has a growing level of appeal to many buyers in today’s environment…popular wisdom will tell you that we have seen a flight to quality focusing on core markets, but in reality it is not that black and white.  Investors are clearly very discerning but many are looking for value, not just low risk”.

According to Rhydderch, the study found that, unsurprisingly given the economic climate, one of the key factors for investors is risk avoidance; and that it has a knock on effect when it comes to the way a deal will be managed; often dictating what markets investors will be drawn to, how expediently they will take action to secure an investment, and in particular how a deal will be financed.

The research conducted by Cushman & Wakefield also revealed that key players demonstrating market growth in Q3 of this year within the Eurozone are France and Switzerland, but also the Czech Republic, Poland, Hungary and Slovakia, as international investors start acting within Central Europe.

Urban Exposure’s Randeesh Sandhu comments, “A few years ago we operated extensively throughout Eastern Europe. Investment in these countries is unsurprising given the strength of their economies, most of which have broadly avoided recession and continue to demonstrate strong economic growth in direct contrast to their Western European counterparts.”

Above all, it has emerged from Cushman & Wakefield’s findings that integral to the market buoyancy seen in this third quarter, are foreign buyers.  In Q1 and Q2 of this year international players represented 34% and 35% of the market respectively; Q3 saw this increase substantially, now up to 40% and expected to be even higher before the year is out.

Find out more about Randeesh Sandhu and Urban Exposure here: http://www.urbanexposureuk.com/en/expertise/key-people/

As Urban Exposure’s Daljit Sandhu observes, creating luxury residences for the worlds wealthiest buyers and investors, and establishing a high profile recognised brand as a developer, also helps when it comes to securing finance and investment:

“In terms of funding, for senior debt it is now essential for banks to see a development track record, but an established brand is also perceived to reduce sales risk and be viewed favorably. It also encourages greater equity interest which is increasingly financing the sector”.

So which luxury developers have the credentials to capture the market?  Daljit Sandhu from Urban Exposure profiles a few of the key players.

Developer Northacre, founded in 1989 by Klas Nilsson and John Hunter, is just one example, with a stellar track record and blue chip credentials, their website states that: “for over 20 years Northacre has successfully designed, developed and marketed over £1.5bn of prime residential sites in London, a track record unrivalled by any other residential developer”.

Renowned schemes such as The Phillamores in Kensington and The Bromptons in Chelsea achieved record prices in their time, and featured award winning design and resident facilities never before seen in London.  Their current Lancaster Gate project (secured on the precipice of the credit crunch) is reported to have doubled the value of the 58 apartments at the Bayswater site, compared with its acquisition back in 2006, and bailed out development partner Minerva during the crisis.

Despite this, Northacre have largely missed a trick in the brand marketing of their company, which remains faceless outside of industry circles, and projects have tended to be sold on the basis of branding and marketing tailored to the individual site.

At the very top of the market, EarlCrown, winners of the Prime London Residential Developer of the Year award in 2010, is led by founder Vivian Imerman’s daughter, the glamorous 28 year-old Bianca Ladow.  EarlCrown specialises in low volume development and development management, completing single dwellings with some of London’s highest gross development values.  Bianca describes EarlCrown’s approach to high-end property as the ‘yacht concept’.

She told Haute Living in an interview earlier this year: “our philosophy is to create the world’s finest homes that are fully furnished and ready for clients to move into at the drop of a hat.  We don’t just consider ourselves to be property managers, our objective is to create little pieces of history that will last for generations to come”.

Currently EarlCrown has a refurbishment project on Upper Brook Street of a 20,000sqft townhouse, rumoured to be worth between £80-£100m and due to come to market in 2012, as well as a 9000 sqft refurbishment of a townhouse on South Audley Street.  They have previously completed projects on Avenue Road, Upper Grosvenor Street and Eaton Square (with gold mosaic spa, 40ft indoor pool, steam room and Jacuzzi).

Developer Finchatton, formed by Alex Michelin and Andrew Dunn in 2001, was conceived when Alex bought his first flat and had to wait in for the BT man, as Michelin explained to the Evening Standard Magazine: “it all took so long. Then I saw a guy driving a Ferrari, and I thought: ‘why isn’t there a property business that offers the equivalent of a Ferrari to people with money but no time?’”

Finchatton’s signature aesthetic is ‘contemporary classic’, muted Art Deco in a palette of pale grey and chrome with marble bathrooms and concealed technology, plasma screens hidden inside bedframes and moving glass walls, hand built closets with specific sections for the Jimmy Choo and Manolo Blahnik collections to suit the heel height, and designed temperature-controlled wine cellars to store Pétrus separately from Bollinger.

Finchatton claim to have designed managed and financed over 50 projects.  They currently have a project on Basil Street in Knightsbridge of three 2,000sqft apartments with parking, due for completion in Autumn 2012, as well as a 9,000 sqft home on Wilton Mews in Belgravia.  A project at 53-56 Hans Place in Knightsbridge bought with US private equity firm Westbrook Partners in 2010 of some 40,000 sqft has not commenced however, and its future looks uncertain.

In any case the Finchatton’s have been clever in pushing forward both their individual personalities in mainstream and industry media and society circles.  The reputation of the company has been built in a similar vein to the Candy Brothers, though they tend not to like the comparison: “we’re not at all in the same market,” they claim: “our projects are much smaller and more discreet”.

As Urban Exposure’s Daljit Sandhu observes, mixing in the right circles and raising your personal, as well as business profile, goes a long way in the establishment of a recognised brand and company face, producing developments that are coveted by the super rich, and ultimately able to achieve higher prices, and ultimately profits:

“Using a company brand with associated house style, lifestyle aspiration and assurance of quality, is becoming important as a differentiator, and lucrative in achieving greater sales value for the ‘designer label’ home.  It also encourages loyalty – once a developer has a client relationship they will be first port of call when the client wants to trade-up, refurbish multiple homes or even outside of the domestic, yachts and private jets.”

Daljit Sandhu is a director at Urban Exposure, who provide mezzanine funding for high-end residential developers in London and the South East http://www.urbanexposureuk.com/en/finance/mezzanine-finance/

According to the Financial Times, the outlook for new build properties in the Capital is good, with a range of schemes due to commence next year that will see the regeneration of a number of London boroughs and improvements in transport links.  Demand continues to outstrip supply, as stock remains low and buyers are in abundance, property shortages still remain:

“Across the capital, planning has been granted for 214,825 units, but Knight Frank estimates that 374,111 households will have been created or moved into the capital by 2020.  Even if there is a sharp pick-up in planning consents and building, agents argue that developers will struggle to eradicate the current implied 42 per cent shortfall in housing.”

With the continued rise in house prices around prime central locations such as Mayfair, which according to Savills, has demonstrated price growth of more than 117% since 2005, and Knightsbridge leading the prime markets with an average price of more than £2,000 per square foot, new build schemes within the capital are also providing substantial additional premiums for developers and investors outside of the elite postcode catchment areas.

As Knight Frank’s Liam Bailey told the Financial Times in a recent interview: “House building in London has picked up sharply since the financial crisis” and it continues to proliferate with a number of high profile developments taking place across the capital, in and outside of PCL markets.  As Urban Exposure’s Adrian Mediratta goes on to explain:

“Those being priced out of the most in demand areas are now looking further afield into other London Boroughs; this is good news for London, and also for commutable towns outside of London.”

Adrian Mediratta is a Director at Urban Exposure who provide market leading mezzanine and structured finance.

http://www.urbanexposureuk.com/en/finance/mezzanine-finance/

 “By blending the role of designer with developer as well as project manager, the Candy Brothers have extended their role to the position of development manager; applying their expertise to other owner’s projects.  By creating a brand synonymous with design excellence, exclusivity and style, the Candy Brothers can achieve prices often far in excess of market comparables.”

In the past, high-end luxury developers have been largely a ‘cottage industry’, with a number of small players whose names were not necessarily publicised when marketing projects.  Reliance was put on creating an individual brand and name for the project, and using an estate agent who was considered to have the relevant experience or connections required to market luxury developments.  For a high-end project, developers sought a high-end agent, and mostly remained behind the scenes.

But this approach is changing, due to the success of high profile developers such as the Candy’s, who have redefined the role of the luxury developer and created a global brand in the process.  The Candy brothers success is notable from the accolades they have claimed, thanks to their premium development projects, and shrewd marketing, they continue to achieve global notoriety for transforming the luxury property market and the way their developments are marketed.

The Candy’s genius was in spotting an opportunity for providing a turnkey solution for the world’s ultra high net-worth buyers and investors, and catering to their discerning and demanding tastes.  In the early days, the Candy’s built their reputation on providing a very specific aesthetic; dark, slick, minimalist bachelor pads with all manner of technological advancements and gadgetry.  They introduced biometric reading (fingerprint-recognition door locks) in the UK and it is rumoured that their apartments came equipped with a 22 bottle champagne ice-cooler.

In addition, Christian Candy, the duo’s salesman, capitalised on the appeal of the jet-set lifestyle; entertaining clients with tables at London’s best restaurants and private clubs, and inviting them onto the Candy’s yacht.  Christian also sold the notion of London as the World’s financial centre and playground of choice for the rich and famous.  It’s speculated that existing clients will only buy within a Candy development, or commission the refurbishment of multiple international homes with the distinctive Candy style.  As Christian Candy Told Management Today in a interview earlier this year:

“We operate what we call the layering effect.  We take a comparable and justify a valuation that is more than that.  We take the base price and then we add x% for the architect, x% for the location, x% for the design, x% for the components.  It’s like an S-Class Mercedes. You can get one for £70,000 or you can get a Rolls-Royce Phantom for £250,000.  They will both do the same speed but the Rolls-Royce is made from different materials and has a different standard of finishing.”

Just this month it is believed that a buyer paid a record breaking £7,500 p/sqft at their One Hyde Park development, far in excess of the previous £6,500 record.  The project is estimated to have made revenues of £1.4bn from the sale of just 60 of the 80 apartments available.  As Urban Exposure’s Daljit Sandhu comments:

“The Candy’s were clever in spotting and catering to a specific market niche, but they also focused on pushing forward their own profiles; socially and in the media, as well as the company’s branding and marketing.  The formula has proved to be highly lucrative and it remains to be seen if the other Super Prime developers now vying for position in the current market can successfully replicate this strategy.”

Daljit Sandhu is a Director at Urban Exposure, who provide mezzanine funding to high-end residential developers in London and the South East http://www.urbanexposureuk.com/en/finance/mezzanine-finance/

As Knight Frank’s Liam Bailey explains, over the last two years, rents in prime central London locations are rising, and according to their latest figures, since January of this year they are up by almost 7%, with a 0.2% increase reported in August, as Bailey goes on to comment, it’s good news for investors:

“Despite the high levels of capital value growth in London over the past two years investors have been securing higher investment yields.  Average prime gross yields have been pushed higher by rapid rental growth, moving from 3.3% to 3.6% in central London between June 2010 and August 2011.”

Compared to the same period in 2010, from June to August this year new rental instructions were up by as much as 23%, with even more substantial increases expected before the year is out.  Demand has risen with supply; meaning that new rental stock is being rapidly turned around, keeping prices and demand from potential tenants high.  Even as sales sectors in prime central London are seeing unprecedented demand, with property prices increasing exponentially this year, the economic uncertainty at home and abroad seems to be driving international demand in rental sectors even higher; with overseas interest accounting for as many as six out of ten tenants.

The proportion of European tenants has increased overall within the market, reflecting the continued demand for property from the smaller European banks and financial organisations, establishing or expanding their London operations, and over the coming years, it is anticipated that above-inflation levels of rental growth will be witnessed.

Urban Exposure’s Adrian Mediratta comments: “gross yields of 3.6% are obviously not going to set the world on fire, but as we are witnessing wealth preservation as the overriding concern in current investment thinking, even a small rise in yields is obviously welcome. I would hope capital growth does not rise at a faster pace to rents which would erode the yield growth eventually, but overall a good story for investors.”

Adrian Mediratta and the team at Urban Exposure provide a property sourcing service to investors looking to buy in Prime Central London, who are interested in yielding commercial and residential property.

As Adrian Mediratta goes on to explain: “while it’s bad news for renters, landlords are enjoying an estimated rental yield averaging 4.5% as a result of the demand”.  According to LSL’s findings, as a result of the recent declines in house prices, the total return from investing in buy-to-let over the last year dropped slightly to 10.1% in July.

The average landlord would have made a total return of £15,961 in the past year, £8,706 in capital gains and £7,255 in rental income.  As Urban Exposure’s Adrian Mediratta explains, it is unlikely that potential buyers will see a change in the conditions of mortgage lending any time soon, resulting in continued demand for rental properties:

“With high deposits still required of buyers, competition in the rental market is increasing, and is likely to demonstrate continued growth over the coming months.   This throws up an abundance of opportunities for buy to let investors looking to increase their portfolios and take advantage of the market buoyancy for rentals, but purchase prices are at historic lows.  Landlord returns will be driven by rental income in the short to medium term, and any future capital growth when the market picks up can be viewed as a bonus.”

Urban Exposure is a private residential landlord with a portfolio of property across the UK, and also sources buying opportunities for portfolio investors looking to invest in the UK.

The traditional routes for hedging risk favoured by investors have shown predictable cycles, with gold prices being driven up to record highs, and US treasury yields plummeting to record lows. Recent weeks saw gold prices waver, however this was seen as profit taking by investors as gold charts peeked, or due to margin calls on other parts of investors’ portfolios.  The Swiss government was forced to take action to fix their currency against the Euro in order to reduce demand, so more recently investors moved onto the Yen which has seen record appreciation in recent weeks.

But despite the continued fragility of European and US economies, London property prices are expected to demonstrate double-digit growth by the end of the year according to Knight Frank’s latest market review.  With geopolitical risks at the forefront of many investors’ minds, prime central London is continuing to benefit from the uncertainties faced globally, while investors profit from the weaker sterling position.  As Urban Exposure’s Randeesh Sandhu explains:

“There does appear to be fundamental differences between the crisis in 2008 when demand in PCL fell away and prices dropped. Buyers were reliant on finance, with distressed sellers dominating the market.  Buyers now appear to be cash rich, and properties on the market are from sellers seeking to profit from the market uplift. Having said that as any London agent will tell you, actual transaction levels are still very low, supply is therefore still constrained and demand is not being met – hence the continued price increases.”

Knight Frank’s recent review of rental markets in PCL for the last two years, also seemed to support renewed confidence in the stability of the UK’s economy: “European tenants have grown as a proportion of the overall market, reflective of the demand for accommodation from smaller banks and financial organisations from Europe who have been setting up or expanding operations in London over the past two years.”

It seems that international investors from Eastern Europe, Asia, Africa and the Middle East are demonstrating sustained interest in residential homes in London.  As Randeesh Sandhu explains: “the continued diversity of buyers also underpins demand fundamentals, with no reliance on a single buyer profile, such as the investment banker, or buyers from specific nationalities”.