'Holistic' broker builds relationships
First published at WWW.RECAPITALNEWS.COM
For Brotherton, advising borrowers means more than simply finding the highest leverage on the cheapest possible terms. “You might think you've got the cheapest terms but it's irrelevant is not practical for a borrower." says co-founder Richard Fine, who set up the business last June alongside Dan Uzan.
"We saw the entrepreneurial end of the property market coming back to life, but struggling to get old banking relationships to fund them” Fine says. "The lending market has become unbelievably fragmented to include insurers, debt funds, private equity and hedge funds, so even the most well-connected borrowers can find it difficult to stay abreast of where they are at; parameters and appetites change quite regularly”.
Brotherton's approach to debt brokerage is a ‘holistic’ one, involving the arrangement, structuring and execution of both debt and equity deals for clients.
In its first year of trading the firm has raised £245m of debt across 24 deals, ranging from £5m to £50m, with 60% of that total for development deals, including student accommodation, residential and offices.
In some cases, it has agreed with lenders for leverage to be raised to 70-80% loan-to-value levels once converted into an investment loan when projects are completed, allowing equity to be released back to the client.
With £36m of equity raised over six deals, Fine says "We usually work with guys who are experienced, but don't have all the cash they need to fund a scheme or roll out a business plan. We often find a private equity fund, hedge fund or institutional style partner to provide the equity piece on a deal.
"Our role is to help sponsors structure those joint ventures, understanding the Language investors speak promote, IRR. hurdles - terms developer clients might not be au fait with."
Acting as an outsourced finance department for sponsors is very like the role that Fine, most recently with CR Investment Management, previously filled at Europa Capital - which works with many joint venture specialist partners - and which Uzan held at London & Capital, where he worked as in-house head of real estate finance.
“We're not looking to build a brokerage where someone might phone up, we'll focus on a deal and that's it, we want to keep clients close by trying to build a relationship with good operators, to establish ourselves as a trusted advisor." says Uzan.
Having sat in the capital seat in the past, the partners think about how deals will play out over the period money will be borrowed.
Our job is not just to get a term sheet from a lender, but to also see how covenants in documentation have an impact on a deal," says Uzan. "We had to manage historic loans that were put in place and when you're in charge of finance on a portfolio in a downturn, you quickly realise the impact that covenants and other terms can have on a deal."
Brotherton plans to hire a surveyor in the ned two months. The hope is that experience on all sides will help set the business apart. Fine is a trained lawyer and Uzan was also in banking at ING "It's about more than knowing a few landers; we can help clients analyse their options, as well as structuring and executing debt." Fine concludes.