Over the past ten years, the Commercial Property Finance market in Ireland has experienced considerable disruption, with an influx of alternative lenders now providing those in the CRE space with another source of capital. Alternative lenders, also known as ‘non-bank’ and ‘direct lenders’, have found a place in the Irish market due to a funding gap created by traditional lenders refusal to take on smaller property investment loans. Alternative CRE lenders in Ireland now present property investors & developers with another viable option when seeking finance for commercial property projects.
Traditional banks have been responsible for over 90% of Irish lending, with developers and those in the CRE market heavily dependant on this single source of finance. Following the global recession, banks’ have taken a different approach to lending, with a stringent criteria and more penal capital requirements put in place for CRE lending requests, leaving Irish companies needing to find alternative options. The more stringent criteria includes more intense stress testing, which impacts a percentage of borrowers who have a poor credit history, thus making it more difficult to access capital. See more about alternative vs traditional lenders here.
A fundamental difference between traditional banks and alternative lenders is the approval rate. Alternative lenders have a high approval rate north of 60%, while traditional banks are closer to the 20%-30% mark. Other key benefits of non bank lenders include:
Interest in funding projects which may not interest bigger players
Efficiency and time saving online portals
Regular updates on application process
Flexibility in structuring deals to satisfy both parties
The most popular loans supplied by Profunder are available below. Similar to traditional banks, a number of options are available for commercial property financing.
Asset refinancing allows the property owners regain control of their assets. It provides funding solutions for the settlement of a loan secured on commercial real estate which has been bought by one of the many loan acquirers in recent years.
A bridging facility is one of the most popular commercial property financing options. It provides developers with an immediate cash injection, allowing for immediate funding of projects. Bridging loans are generally short-term loans, with the term less than 2 years in most cases. Bridging loans are requested when a developer is waiting for long-term financing to be approved.
Interest only facilities can be provided to allow the property owner time to manage their property assets in terms of maximising the income stream from the properties. This will improve both the capital value of the property and long term loan repayment ability.
All the usual due diligence and standards apply when looking for CRE finance from an alternative lender. Each loan application is treated as an individual case, with the repayment plan devised based on opening loan to value position, cashflow from the property, quality of tenants and property location. The major difference between alternative lenders and traditional lenders is the underwriting process, with time, feedback and risk management a USP of alternative lenders, ensuring a transparent process. You can view the our complete lending process here.
A PwC report titled “Emerging Trends in Europe” ranked Dublin 3 out of 31 cities to watch out for in terms investment and commercial property development. On a whole, those involved in real estate remain bullish and still see value in the market. You can read the full report here.