Avamore revamps product suite to keep deals flowing

By David Craik 23rd May 2022

Avamore Capital is revamping its development products to build on its record-breaking start to 2022.

The group, which takes a residential developer centric approach to lending, will launch a rebrand and refresh of its four key products on 23 May – Refurbishment, Part Complete Development, Bridging and Development.

As explained by Managing Director D’mitri Zaprzala, who joined Avamore last October from Octopus Real Estate, the move comes after listening to feedback from both its borrowers and brokers and could help it take more advantage of a soaring property market.

Strong Start

“It’s been a really good start to 2022” he says. “We have seen record breaking volumes so far this year agreeing over £350million worth of transactions.

Our average deal size has ticked up to £1.6million and our live loan pipeline is also at best-ever levels. In addition, the next few weeks will see us move beyond £100million in completions for the year.

But thanks to the feedback from our clients and own reading of the market we believe there are many more growth opportunities. It is why we are launching the biggest product revamp in group history.”

One of the main changes sees Avamore’s first ever foray into commercial bridging.

“We get borrowers coming to us on commercial to residential projects for development finance,” he explains. “They have already acquired the site via a bridging loan.

We thought why not step into the process a little bit earlier and offer the bridging product ourselves? This makes the whole development process so much easier for the borrower.”

However, he stresses that this does not mean a move into full commercial bridging. “That’s not our space. We want commercial with a residential development focus so offices or care homes into flats for example,” he explains.

It’s an important distinction for Zaprzala who admits that before joining Avamore he thought the company did bridging and development lending in equal measure.

“But in reality, at heart, we are a development lender, and it is part of the reason we have gone through this refresh. We want to make that clearer to the market,” he explains.

Development Focus

He is mainly referring to its Finish & Exit product which will now be rebranded and launched as Part Complete Development.

“We were pioneers in this space, but surprisingly people didn’t know that we did it!” he explains. “The name didn’t do the product justice, so the new title passes the Ronseal test – it does what it says on the tin.

We want people to know that we are the only show in town and that we will step in at any point in a part complete development.

Our competition will come in very late in the process when the development is wind and water tight and pretty much finished. We can step in one brick down.”

He says this is even more important in the current climate when funders are retreating, and schemes are taking longer as inflation rises and supply chain squeezes continue.

“If a lender doesn’t want to fund anymore then that is a textbook case of where we step in,” he explains.

“What I have always found is that when there are challenges like these it tends to be the mainstream lenders who leave quicker.

Whilst there will be some trepidation in the specialist lending sector this is where we are at our best. We can provide the quick responses, trust and nimbleness people need.

We are primed to thrive despite the economic headwinds.”

Heavy Refurbishment

Being development focused naturally leads the group into heavier refurbishment transactions and this is where its Refurbishment product is now pivoting towards.

“Whilst our product range includes lighter refurbishment, we are seeing much more demand for heavier refurbishment deals in our sweet spot of between £1 to £5million.

I think this size of deal is often left behind in the market. It is either too big for some of our competitors who are more in refurbishment/bridging and too small for those who consider themselves to be a development finance lender,” he says.

“I think we are really good at heavier refurbishments; the bigger builds and bigger projects and our new product change will cater for that.”

The Development product will give more emphasis and clarity to the £1million to £5million mark and its typical SME customer.

“We generally lend to developers who have some experience and a company structure but who have not ticked enough of the boxes for a high street or mainstream lender,” he states.

“Some don’t have a traditional developer background. Some could have been a contractor for many years, and this is their first or second product or they are a project manager who now wants to do their own personal developments.”

Despite the upheavals of the last two years the developer demand just keeps coming. “Covid changed what people were looking for property-wise in terms of more space and getting out of the city.

We’ve seen more transactions in towns and commuter belts, but we are also seeing flats become more popular again,” he explains.

“I’ve worked in this industry for 20 plus years and there has always been a supply and demand imbalance. People want to find good quality stock.”

Rates Riddle

The group has also changed rates and fees as part of the shake-up to ‘remain competitive as we absolutely can be”.

“There are certain areas where we will be the most competitive in terms of rates. We expect to see our development rates remain market leading for in our peer group, but there is more to a deal than rates. Clients are looking for flexibility and lenders who can find a way through complex deals,” he says.

The change partly reflects the recent moves made by the Bank of England to hike interest rates to combat inflation.

“Most of us in this sector have only ever experienced a low interest environment,” Zaprzala says.

“I can remember rising rates and it will be fascinating to see how lenders react to it. Will they fear it and put their heads in the sand and not change their rates?

Or will they find solutions such as some of the floating rather than fixed rates approach, we are now seeing?

That trend will continue, and it is one we are actively looking at presently.”

It is also eyeing up more geographical expansion with a focus across the rest of England and Wales.

“Our heartland is London and the South-east but I’m agnostic where the deal is as long as it makes sense,” he says.

“For example, when I was at Octopus, we made a big move into Manchester, and I can see us going on a similar journey here.”

Zaprzala is proud of his first few months in the Avamore job achieving milestones such as setting up an internal sales team to complement the existing Credit Analysis function.

“When I came in, I really wanted to establish a Head of Sales and a team which could react quickly to any enquiries coming in.

That speed has also been important but, unlike some rivals who hand out terms right, left and centre in an hour, we consider each deal carefully. I’d rather terms came back four hours later if it has been looked at carefully and accurately.

Clients are really looking for that trusted relationship right now,” he says.

Zaprzala is confident demand from clients will keep flowing and that the revamp will help it hit ‘stretching targets’ of lending between £250million to £300million this year.

“Yes, there will be challenges such as cost of living over the next 12 and 24 months. I think we will see a softening in house price inflation as bills go up and mortgage rates go up. But it will steady off with gradual growth rather than crash,” he says.

“We are feeling positive though. I think the refresh will land superbly well. We want to establish what Avamore stands for in the lending market and where our expertise lies. It’s an exciting time.”