Maslow Capital launches new senior debt product
By Ellis Sher, co-founder and CEO
In an illustration of how the UK property development finance market continues to shift away from traditional lenders, Maslow Capital has launched a new senior debt product, with rates from 5.65% above three month LIBOR.
This is in addition to our pre-existing stretch senior offering; both products are aimed at loans from £2.5m-100m.
The financial crisis rightly led the banks back to basics and towards a return to more traditional lending. In this tougher regulatory climate, borrowers have struggled to find the same levels of pre-crisis funding and specialist property development lenders such as Maslow, founded in 2009, have moved in to fill the gaps. Since 2009, alternative lenders have grown in number and size and have gone from filling the gap to playing a significant part in the property lending landscape. The combination of an increase in the required regulatory capital and heightened risk aversion has meant that traditional banks continued to shy away from the provision of speciality credit such as development finance, which led to the rapid growth in the provision of alternative capital. That trend is set to continue.
Ellis Sher, co-founder and CEO of Maslow Capital, said: “When we founded Maslow in the depths of the financial crisis, we provided funding alongside traditional banks to ensure that developments reached practical completion. Back then, there were many banks that would not or could not provide the necessary funding to complete the projects, even though doing so provided them with the best chance of recovering their capital. In such circumstances, we were able to generate mezzanine returns while assuming a senior debt position in the capital stack.
“As the crisis eased and liquidity returned, the lending landscape began to normalise. The new normal, however, bore no resemblance to the pre-financial crisis era. From 2010 onwards, we saw the high-street banks adopting much more traditional lending models, capping gearing levels to 50% on developments while the challenger banks flourished with the provision of slightly higher leverage but still well below 60%.
“Lenders like Maslow provided whole loan solutions which provided more leverage than the banks and which became known as stretch senior. In 2016, it became evident to us that another shift in our market needed to happen whereby we could provide competitive financing along the lines of the challenger banks. With the recent launch of our senior debt product we have begun that journey. The combination of specialist knowledge and competitively priced products has been well-received by the market.
“Having an ability to price for risk across the capital stack means we can now cater for a variety of borrower requirements, from those that wish to leverage their equity with our stretch senior product to those that wish to benefit from a lower cost of capital by accessing our senior debt product.
While we have become accustomed to uncertainty, we at Maslow remain confident in our view that the shift towards alternative capital is permanent and that the industry will continue to grow.”