Peer perspectives on fundraising in a downturn

COMMENT The late Tony Pidgley once shared with me that a defining moment for the Berkeley Group came during the global financial crisis, when it acquired a significant asset against the trend of its retreating developer peers. He explained that it sent a message to the sector that the company was willing and able to do deals, despite the chaos around. The real deal hunters of our sector will relish the opportunity to fine-tune their strategy during tougher times and find the opportunity. While larger housebuilders are normally better stocked with reserves to move on more recessionary-relevant opportunities, the SME developer will often need to bolster their position with external equity. The question is, how do they give these outside parties confidence in their timely opportunity at a time when so many others are being fearful? For almost six years now with Developers Boardroom, my personal approach when helping our delegates solve complex challenges has been to invite perspective from established and respected industry players. So, true to form, I asked those who are living it right now. A path to the positive I started with Adam Sturdy of Pinstone Group, a contributor for more than five years and a well-established family group investor. “As we move seemingly into even more uncertain terms, somewhat schooled by our crisis-inducing national media, the challenge of balancing risk versus end revenue becomes harder and harder,” Sturdy told me. “To provide more certainty to gaining the funding and at lesser rates, the more that a developer can demonstrate paths to a positive end, the better, with multiple options considered when the inevitable timescales are challenged or the market or interest rates inevitably fluctuate.” He added: “Knowing senior debt will possess a good deal of influence and maybe even control over the borrower’s project, demonstrating a positive and trusted relationship with all lenders and investors throughout the project’s journey helps show wider confidence. Maybe even showcasing how the senior debt has historically dealt with project setbacks. The difference is, investment is not ‘fund and forget’ – communication throughout is key, regardless of how good or bad it’s going, internally and externally.” Show a track record Hallcroft Finance’s Adrian Cormican was next to lean in. “We see people present to us in a strong market and they don’t do the basics,” he said. “When funding becomes harder to source due to tighter economic conditions, you have to ensure all the following are 100% attended to, otherwise the deal will go to the bottom of the pile and probably be ignored.  “Be prepared – showing a professional business plan with the next five years mapped out is essential. It might not happen that way but you have a plan. “Next, investigate – when a deal becomes live, ensure you evidence your skillset. For example, if you can see a planning uplift, document why and how you will achieve it. And think about the exit – we all need to see and feel confident that there is not just one exit in case of issues. Use peer and professional perspectives to research and present your options.” Finally, the hardest role is for those actually raising. Developers Boardroom’s programme currently has seven firms raising for their economy-adjusted strategies, offering a variety of viewpoints. Here are a couple. FxCD’s Fahd Gondal said: “Being versed in the key concerns and motivations of the capital allocator right now, and their other investment options, is how we make sure we are communicating our retrofit projects to investors, on their level.” Siobhan Cook, of Archco Developments, said: “We are focused on reinforcing our 13-year construction and investor track record. These are our assets, our reputation, and we have to demonstrate again and again in our pitches how this translates into de-risking and problem-solving. No deal is without challenges but we proactively show we have tackled these historically.” Everyone knows the market is awash with capital right now. The level of skill needed to give that capital allocator confidence in you and your development, alongside the turbulence, has shifted from group stages to the knockouts. And you will need all the subs. As a lover of peer perspective, I would love to take suggestions on LinkedIn as to what makes your development investment instinct say “let’s go for it” in a climate like today’s. Alex Harrington-Griffin is the founder of Developers Boardroom