As a business, we have funded all kinds of development projects; commercial, residential, and mixed; from small refurbishments to large scale projects costing millions of pounds. In January of this year we were buoyant about our potential growth and profitability and then, Covid turned the building sites we fund into ghost towns.
In December 2019 we signed our largest loan to date, worth £7 million; a development in Glasgow of 45 apartments. The initial loans and first draw down were over subscripted by our investors and now 8 months later, although we still believe the project is a sound investment, we have refocused our funding towards smaller loans. Our investors understandably are cautious. They are keen to diversify their investment strategy within their property portfolio. Larger loans that fund huge apartments do not offer enough diversification for some of our investors.
The Pandemic changed the way we work, overnight one hundred years of office working tradition was wiped out in a single statement; ‘Stay Home, Save Lives.’ The city dweller does not need to live ‘walking distance from work’ and those that live in the commuter belts do not need to battle on the train to get to the office at an unspeakable hour. We have realised that we can all work effectively from home, even with our children roaming around in the background of our Zoom calls. Trendy urban living may have been replaced by an exodus to the countryside. A house in a far-flung part of the country, with separate office space, a vast garden with fast broad band download speed and a short commute to the supermarket are the main requirements now.
Our business model has changed in reaction to the pandemic; we have taken the decision to focus on developments where houses are being built. We look at loans on a case by case basis, however for now we will be cautious with loan applications from developers who propose to build apartments. This decision, we believe, will protect our investors capital, and alleviate some of their concerns, as it is in line with market trends and de-risks our loan book.
Right now, as a small lender, it is the right decision be more cautious when deciding which projects, we will fund. As market trends change so too must our lending model.
Featured image provided by Henry Julius on Unsplash