Insider Media Limited

Midlands property professionals are not expecting a quick fix to the problems the industry is experiencing in securing finance for new development schemes. That was the sentiment at a discussion held by Insider.

A combination of a lack of public sector finance following the demise of the regional development agencies and a lack of funding from traditional lenders since the banking crisis has created a situation where funding for schemes without a pre-let is almost impossible to come by, attendees warned.

Speaking at an Insider round table discussion was Andrew Whelan, regional director of Midlands real estate at Santander Corporate Banking - one of the few banks currently lending in the commercial property market.

He said: “There’s a huge wall of refinancing out there that’s due in the next few years. That’s going to be a big issue. I think there’s going to be a constant pressure on money. In terms of development finance, it is there to a degree but a lot of this is for schemes that have a pre-let and a good covenant.”

It’s a view echoed by Rupert Young, development director of Birmingham based Nurton Developments. “Some of the banks would probably like to be active in 2011 but what we have to remember is for them to do new lending they have to get some money back in from the previous lending. One needs to think about the pressure from the overhang of refinancing.

"I think those banks will choose to lend to quality new customers but mainly to existing customers but they will be looking to bring their customer base down a bit,” he said.

Alternative sources of property scheme finance, such as funding from institutional investors or the use of tax increment financing (TIF), whereby loans are taken out to fund development and offset against future business rates, were given a cautious welcome.

Waheed Nazir, director of planning and regeneration at Birmingham City Council said Birmingham has had some enquiries from institutional investors about funding schemes but this is based on the city taking some of the risk.

He is more optimistic about TIF. “We are quite confident that that we can use this for funding development schemes, particularly longer term, complex scheme such as Longbridge and Paradise Circus or the infrastructure work at Eastside,” he said.

But Nazir admitted that nothing is likely to happen before 2013, by which time we could be into a different property market cycle.