Eight Essential Strategies to Get the Best Property Development Funding Partner

Eight Essential Strategies to Get the Best Property Development Funding Partner

A lot can go right and even more can go wrong when sourcing and securing funding for a property development project. And starting with the wrong finance partner can be the single most critical point of failure. It’s also a mistake that is very difficult and very expensive to unwind.

In this article we provide a simple framework for you to use to be confident that your finance partner fits the needs of your business and your project.

The market is full of finance brokers and you will not have a problem finding someone to say they can get you finance. What this misses however is that the finance partner role can, and should, offer far more than just that. Here are seven strategies that will help you find the right partner for your project and ensure they help deliver the best project and returns possible.

1. Strength and Depth of Relationship

Fundamentally the strength and depth of the relationship between you and your development funding partner is critical to you firstly being successful in obtaining finance and secondly to ensure you are well supported not only when things are going well but far more importantly when unforeseen things go wrong.
As in life, trust is earned and built over time based upon the integrity and results upon which people of demonstrated over time.
There is nothing like a high trust relationship between Developer and Funding Partner to get things done quickly and efficiently in the good and the bad times.

2. Match Their Property Development Finance Experience to the Project Profile

Start by defining the project profile, focusing on its key risk points and what you regard as the more unique requirements for the project and funding. Against each of these profile points test their experience. Have they dealt with it before, what is their view on approach and solution options.
Whilst many say they can do finance from $1m to $300m+, you are seeking a team that have actually done it for a project that is shaped like yours. You are seeking an experienced property development finance specialist who can contribute to resolving both your finance and broader project challenges and opportunities.
Is this experience key man dependent? You cannot afford to have the intellectual property sit in the head of one person only, so ensure the above analysis considers this and checks that more than one senior team member can provide the experience necessary.

3. Require An Independent, Advisory Development Finance Role

You don’t want to just be told that everything is fine or be provided a standard solution. It is essential that your property development finance partner is prepared to ask questions, challenge your view and provide independent advice and insights.
They need to take the view that they are being paid to ensure that the project will work as it should, and that their advice should consider the whole portfolio and group position.
Test this by throwing a few curveballs into the conversation to see how they respond. Also get a sense of how they view their role – are they first and foremost an finance provider or an advisor. You are seeking the latter.

4. Require A Top To Bottom Risk Assessment of Your Property Development Project

Finance is just one piece in the puzzle – without every other piece in the puzzle being put together properly, getting through to the end without failure would be pure luck, so you don’t want a partner that rushes to place the finance as the first step.
Evaluate their approach to ensure it involves up-front research and risk assessment. These critical first stages should include a pragmatic assessment of all facets of the project and group structure such as legal, contracting and tax structuring, to market assessment, to building, cost and deliverables.

5. Evaluate Their Partners

Your property development finance partner will rely on a number of third parties to deliver their service to you. There will be legal, marketing, accounting and other support relationships behind most service providers, and these will influence the quality of their work, so make sure they are up to the standard required.
Request a list of their key supply partners, their role in your project and make sure they match the standard you are holding your finance partner to.
How they have built their network provides important insight into how they see themselves and how they will operate with you.

6. Test Their Versatility

It’s important to consolidate your supply partners where possible to simplify project and relationship management.
Evaluate related roles that you are also seeking to fill through a third party partner eg, would your project benefit from a level of project management support? If so, ensure they can fill the role of Development Manager for a project like yours.

7. Match Their Involvement to the Development Project’s Lifecycle

It’s important to determine the stage that they ‘step in’ and ‘step out’ of the project. Where do they see their role and responsibility extend to. You don’t want someone who disappears the second the loan is written. Ideally you are looking for a finance partner that is involved in the project until the funding is cleared and the last settlement has taken place.
These ‘step in, step out’ points will influence the approach they take, the level of ownership and involvement they take on and the KPIs that are used to measure success.

8. Test Their Understanding of Your Property Development Project’s Strategy

‘Strategy’ is a term that is over used and often abused in business. But it is essential that you can communicate yours and that your property development funding partner understands it. To do this, test their understanding of:

• What your business/project could be
• How you’re going to do it
• What will differentiate it in the market
• How you are going to complete it
• Key risks
• How you will make money out of it

Execution is arguably the most important part of a strategy – as the saying goes ‘a simple plan, well executed’. Ensure they exhibit an understanding of your strategy and can put forward a practical approach to execute and deliver it.
A strategy is also a live entity, so their approach needs to reflect this with regular monitor, review and revise processes.

 

Choose the Right Property Development Finance Partner

Choosing your property development finance partner is an opportunity to add real value to your project. The outcome can be significant de-risking, reduced finance costs and a smoothly run, well-delivered project.  Get it wrong and it can mean lost opportunity or even outright failure.

About Development Finance Partners

At Development Finance Partners we see our role as being about far more than just writing a loan for your project. We are truly a part of the development team to ensure that the whole strategy – and every single factor that is a part thereof – is pragmatically considered and actioned, in order to make it a success.

Find Out More

No matter what size your project, Development Finance Partners have the experience and capability to make your project and portfolio, or that of your clients’, a success.  Please do not hesitate to contact us to discuss how adding Development Finance Partners to your development team can add value.

Share Your Experience

What has been your experience evaluating and engaging with development project finance partners? When has it worked, or when has it not? Let us know by sharing your insights below.