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Development projects are getting more and more complex, says new entrant Silo Advisory, and not everyone in the finance industry is keeping up.
Silo Advisory founder Connor Ryan says that with the major headwinds in the development sector, now is the time for financiers to be more flexible, rather than less.
“I believe a new age of private credit is coming, because a lot of lenders, whether bank or non-bank, they like the simple projects,” Ryan said.
“Their mandates for deals are often conservative, they like the easy, ‘vanilla’ deals that don’t take much looking after.
“But now, deals are getting more complicated. Construction costs are going up, they are faced staffing shortages, timelines are blowing out, it’s tough, I won’t sugar coat it. Deals are only going to get hairier.
“Every project is different and there's a gap in the market to fit into these deals that don’t fit into a neat little box.”
The problem of course is that lenders have been reticent to take on any projects they would consider riskier, and climbing interest rates have only compounded things.
“I saw so many opportunities to fund deals in 2023, prior to launching Silo, but many, even non-bank lenders, turned away up to 80 per cent of those deals.
“Placing with private investors means we have access to private individuals and offices, who are often more open-minded, and it’s nice to be able to talk to lenders to have these conversations and place their project where it is best suited rather than getting a no from mainstream bank and non-bank lenders.”
And in fact, interest rate rises are making non-bank lenders more attractive than ever, he says.
“The interest rate difference between bank and non-bank is slimming by the day,” says Ryan.
“Anybody that comes to a non-bank lender is always a little hesitant, concerned that interest rates in non-bank space are higher.
“But it's a cost-benefit analysis, you get more open-minded people and businesses willing to back your project, and quicker turnaround times - funding in four weeks rather than four months.
“That’s where we provide education in that space, before we even begin talking about the deal.”
Of course it’s tough out there in other ways, said Silo's Connor Ryan, but there should be the flexibility in the brokerage space to work out complex deals in an increasingly complex market.
“Having access to more than 150 lenders, we do have a product that can fit everyone’s needs.
“We want to see everything and anything, and it’s my personal opinion that if I don't do it someone else will.”
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