The Alternative Real Estate Lending Market in Ireland

Our Irish MD Niall Hurson was delighted to be interviewed for the June edition of Irishbroker Magazine for Brokers Ireland, talking about all of Novellus Ireland‘s offerings and the gap that Alternative Lenders fill in the Irish Market.

Novellus Ireland offer short-term bridging finance and traditional longer-term senior debt finance for all types of property investment & leisure assets as well as site finance between €5m & €25m, but we can look at transactions between c €1m – €50m.


How is the Real Estate lending market at the moment?

Since the departure of KBC and more recently Ulster Bank from the Irish Market, the regulated and non-regulated lending environment for Real Estate borrowers has become significantly more challenged. This environment has only been exacerbated by the quick rise in interest rates over the past 9-12 months. Notwithstanding the rise in interest rates, Real Estate remains a long-term resilient asset class.

While the established Irish banks remain cautious and somewhat restricted to consider new lending opportunities, alternative lenders like Novellus are filling the void.


Why consider borrowing from an Alternative Lender?

Alternative lenders fill an important gap in the market, left by the established traditional lenders. They typically offer quicker decisions, with simpler processes and can often offer more flexible terms and conditions.


What is bridging finance?

Bridging finance is short-term in nature, typically 12-18 months, and can be used to assist with the purchase of property, land or fund refurbishment. Interest can be paid or rolled up into the loan. Most alternative lenders will not provide finance for primary dwelling homes.


What is the benefit of bridging finance?

Bridging finance can assist borrowers to move quickly to either purchase or refinance property or land. Often there can be an opportunity to enhance the value by seeking planning permission, completing a small development, converting the existing use, refurbishing or improving the “green” credentials of the property to increase rent. All the while interest can accrue within the loan facility, freeing up capital to complete the investment.

Many alternative lenders would require the borrower to be a corporate entity or Special Purpose Vehicle, and can often require an element of guarantees to support the underlying lending transaction, in addition to the property being taken as security.



What about longer term financing?

Some lenders in the alternative space have the ability to offer longer-term loan facilities on investment or income producing properties. This would be more aligned to traditional real estate finance, however may not meet the risk criteria required by the Banks. Examples such as shorter term leases, smaller tenants, or higher debt requirements.

Given the changing face of retail, with the considerable move to on-line offerings, and the post Covid changing office occupancy trends with Work from Home, Banks are significantly more cautious to lend on retail or office investment properties than they would have been in recent years.

You can combine the initial bridging loan with a term facility and benefit from more favourable pricing once the improved value and / or income from the property have been realised.


How do Brokers feature in the Alternative lending space?

Given the wide reach of Brokers and Financial Advisors across their large network of clients, they act as intermediaries to bring solutions to their clients’ financing needs. They are a very important source of business for alternative lenders, who endeavour to build strong relationships with these Brokers resulting in repeat, mutually beneficial business for the Broker, the lender and ultimately for the clients’ benefit.


What does Novellus bring to the Alternative Lending Market?

Novellus has the benefit of full discretionary capital available to deploy, giving quick decisions, and early certainty of execution for borrowers to transact. As it’s our own capital, our initial terms are fully credit approved, subject to diligence. This is certainly not the case with the Banks and not always the case with alternative lenders.

Having just announced our intention to place €300m in additional funding into the Irish Market across all property asset classes, we see significant growth coming from informed and active affiliate channels.

The minimum bridging loan size is c. €1m, however, we typically target a term loan size of between €5m and €20m, where Loan to Value can be up to 65% – 70%.


How can we help Brokers and Financial Advisors?

We expect growth in term and bridging finance across the wider Alternative lending market from existing Broker relationships but equally, we are taking on new Brokers and introducers of new business every week. We’d be delighted to help any introducer with prospective business to understand our process and enable them to support their clients with our range of products. We would be delighted to hear from any Brokers who have a direct relationship with their borrower clients, that believe they may have a funding situation we can help with.