prime property<\/a>, due to higher interest rates, stamp duty and the departure of rich people from the UK, has made development opportunities riskier and less appealing to banks.<\/p>\nAdvisers said wealthy individuals were also replacing Russian investors in the UK after many were sanctioned following the invasion of Ukraine in 2022.<\/p>\n
Laura Uberoi, head of private wealth finance at law firm Addleshaw Goddard, said the wealthy needed to borrow because they often had little cash on hand.<\/p>\n
\u201cThe trick to being a multibillionaire is having zero liquidity \u2014 borrowing is consistently needed by ultra-high net worths to fund their ongoing liquidity needs as well as their next business venture,\u201d she said.<\/p>\n
Nazir Dewji, global department leader for real estate at law firm BCLP, said: \u201cWe\u2019ve seen family offices creating debt arms over the last two to three years as an alternative way of investing into real estate.\u201d <\/p>\n
Some loans are given out before development starts, he added, while others were designed to support acquisitions. <\/p>\n
London-based Cohort Capital started making loans six years ago as a family office and has since put together syndicates to make loans. By the end of this year, it will have originated \u00a31.5bn in loans from 15 family offices, which provide 90 per cent of the capital, according to co-founder Matt Thame, with the rest coming from banks.<\/p>\n
Cohort makes short-term loans that average \u00a315mn for acquisitions and refinancing, and has experienced a rise in business as banks retreat, he said.<\/p>\n
One example of a Cohort loan was for a student residence in Paddington, west London, being bought for \u00a385mn. \u201cWe funded \u00a360mn in 10 days,\u201d Thame said, charging its typical interest rate of 12 per cent.<\/p>\n
Giuseppe Ciucci, executive chair of high net worth adviser the Stonehage Fleming Group, said family offices were often much faster than banks at providing funds at a \u201cvery attractive rate\u201d, particularly when property is pledged as security. \u201cIt\u2019s become more of a go-to solution than it used to be.\u201d<\/p>\n
One private banker said a client was an expert in a very small slice of London super-prime property and was therefore comfortable assessing collateral valuations. While many lenders do \u201cknow your customer\u201d checks, in this case he did not want to.<\/p>\n
The head of a single family office, who did not want to be named, said: \u201cWith real estate there\u2019s a big advantage that it\u2019s quick and easy to take charge over the assets.\u201d Lenders can register charges over an asset at the Land Registry.<\/p>\n
Other types of assets were less appealing, the head of the family office added: \u201cThings like yachts and art are more complex; I would be concerned about them. Famously, yachts move.\u201d<\/p>\n
Uberoi said simple loans started at interest rates of 10 per cent. However, lending using \u201cyour funky things\u201d as collateral, such as land without development permission, \u201ccan go into the twenties and people will pay it because they want quick money \u2014 they will pay it because no one else will lend because the assets are risky\u201d.<\/p>\n","protected":false},"excerpt":{"rendered":"Unlock the Editor\u2019s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this…\n","protected":false},"author":2,"featured_media":251464,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,56,54,55],"class_list":{"0":"post-251463","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-uk","11":"tag-united-kingdom","12":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/251463","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=251463"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/251463\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/251464"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=251463"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=251463"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=251463"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}