23 Jun 2023

Looking for the exit?

Shahil Kotecha, CEO & principal at Pivot Finance tells us how collaboration breeds confidence and creates win win opportunities

Launching a Pivot product with a guaranteed exit has definitely increased the flow and origination of enquiries for Pivot Finance.

As a lender, it’s understandable in any market condition to want to remove risk and uncertainty. Pivot’s collaboration with LDS started in April 2022 when we added the LDS Sales Guarantee as a bolt-on to our usual senior debt loans.

Our typical loan size is between £1m and £12m with a GDV up to £15m, which covers projects ranging from a couple of houses up to around 60 flats. As a lender, having an LDS Sales Guarantee to buy any homes unsold after the agreed sales run-off period means less of a headache for us should the market move adversely.

For the developer or builder, there are obvious benefits. Once the Sales Guarantee is contracted, LDS releases a 10% cash deposit to the developer. This is equity they can use to reduce their cash contribution allowing them to focus on larger or multiple sites, as their capital can do more.

Developers have not only got the backstop of LDS buying any unsold properties, they also receive a cash release which improves their returns. It’s unsecured and interest-free, which means equity can be spread further.

In the current market, this means they can keep some cash in reserve, which could be called on if there are cost overruns or delays.

When it was first launched, our clients would use a Sales Guarantee primarily for the cash release. However, we have seen a recent shift as the market has softened, with developers realising that if things get really bad, it’s a backstop and guaranteed exit for both the developer and lender.

From a lender’s perspective, working with LDS is simple and straightforward. We have an upfront intercreditor agreement for all shared projects, allowing for swift completions. This means when any individual project proceeds, LDS can quickly complete due diligence and move to contract. It’s a very streamlined process.

As we move forward this year, there are of course uncertainties in the market. But there are smart solutions available. Those who are willing to keep having conversations to enable collaboration and find a way to make things happen will be the ones thriving in 2023 and beyond.

Developers have not only got the backstop of LDS buying any unsold properties, they also receive a cash release which improves their returns

Shahil Kotecha
Pivot Finance
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