Refinancing – Becoming a part of the development strategy

Why development exit finance is becoming more strategic

Development exit finance is becoming an increasingly important part of the property finance market. If the enquiries we’re receiving at PMJ Capital are anything to go by, the market has entered a new phase.

Over the past few months, we’ve seen a noticeable increase in development exit enquiries, refinance bridge applications and requests for term extensions. This is also a trend reflected across the wider market. According to the latest Bayes Business School UK Commercial Real Estate Lending Report, around 60% of commercial real estate lending now relates to refinancing rather than new acquisitions, which is a real demonstration of how the market is evolving.

The reasons behind that shift are changing the conversations lenders like us are having with brokers and developers.

Developers are taking a more strategic approach

Refinancing is no longer simply a solution when a project hasn’t gone to plan.

Many of the developers we work with have delivered strong schemes, but they’re operating in a market where sales can take longer than originally forecast. Others are choosing to hold completed units rather than discount them, while some are looking to reduce finance costs as they work through their sales programme or prepare for the next opportunity.

Increasingly, refinancing is becoming part of a developer’s overall funding strategy rather than a reaction to a problem.

The broker conversation is changing too

For brokers, this means refinance discussions are happening much earlier in the lifecycle of a project.

Rather than waiting until a facility is approaching maturity, many brokers are reviewing exit strategies several months in advance, giving clients more options and reducing unnecessary pressure.

One of the key considerations is understanding which route best fits the client’s circumstances. In some cases, a development exit facility may provide the breathing space needed to sell completed units at the right pace. In others, a refinance bridge or a short-term extension may be the more appropriate solution.

The right answer depends less on the product itself and more on the developer’s objectives.

Every refinance has a different story

Anyone who works in property development knows that no two projects are the same. Construction delays, slower sales, planning changes or evolving market conditions don’t automatically point to a project that’s underperforming. Often, they’re simply part of delivering a scheme in today’s market.

That’s why lenders need to look beyond the headline figures and understand the wider context surrounding each transaction.

For developers, that means working with a funding partner who understand the realities of the market. For brokers, it reinforces the importance of placing cases with lenders who are prepared to assess opportunities on their individual merits.

Looking ahead

While funding new development opportunities will always be an important part of the market, refinancing will continue to increase in significance for the foreseeable future.

The key is recognising that refinancing isn’t necessarily a sign that something has gone wrong. Increasingly, it’s becoming another strategic tool, helping developers manage cash flow, protect value and create the flexibility needed to achieve the best commercial outcome.

To find out more about PMJ’s development finance how we support brokers and their clients visit our dedicated page, or contact our relationship manager: Chris Fortune cfortune@pmjcapital.com