A development lender has secured a £94 million capital injection, in a move which sees Blackstone make its first foray into UK residential lending….
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div>A development lender has secured a £94 million capital injection, in a move which sees Blackstone make its first foray into UK residential lending.
Private equity group, Blackstone, has made its first foray into UK residential lending as the majority backer of a £94 million equity injection for Pluto Finance.
Blackstone and Clearbell Capital Partners, along with three additional blue-chip investors, have backed the lender in a move aimed at kick-starting developments to meet the UK’s housing shortfall.
The capital will allow Pluto to lend £360 million to residential development schemes across London and the south over the next four years.
The £94 million injection follows an initial £100 million raised in May 2013.
Pluto said it planned to use the funds to provide loans to developers creating housing schemes in London and the South of England in the next four years.
The lender provides developers with loans of up to 90 per cent of the development, with a minimum loan size of £10 million. It also provides mezzanine loans – a class of capital hallway between bank loans and conventional equity – to projects with a total cost of less than £10 million.
Blackstone is providing capital from its Tactical Opportunities fund, which is headed by Senior Managing Director, Chad Pike. Clearbell is providing capital from Clearbell Property Partners II.
Pluto expects to reach the £360 million lending target by recycling capital it loans out over the four-year period.
Chris Philp, Chief Executive of Pluto Finance, said the loans provided significantly more capital to developers than traditional bank lenders and was helping to “Get Britain Building”.
He said: “We are filling the gap left by the banks and enabling development to happen. What’s unique about what we’re offering, is the 90 per cent loan-to-cost, which lets developers’ cash go a lot further.
“What we are seeing is there is still this enormous shortage of housing. There were only 122,000 new home starts last year, but actual demand for new homes is 235,000 a year.”
Chad Pike said: “We clearly see the difficulty that housebuilders small and large alike are facing, in getting full funding for quality schemes with planning consents.”
Manish Chande, Senior Partner at Clearbell Capital, which has invested in Pluto since its inception, said: “Economic recovery may be kicking in, but the impact of the last five years continues to take its toll, even on quality developers who are building in strong areas. This new round of funding will ramp up the lending power of Pluto.”
Pluto Finance provides developers with “stretched senior” loans of up to 90 per cent of the cost of the development, with a minimum loan size of £10 million and average loan length of two years.
The £94 million investment into Pluto is provided through a fund, backed by the five institutions, which is then used to lend out to borrowers.
Any projects are subject to approval from a credit committee, which includes Pluto executives and representatives from Blackstone and Clearbell – each with veto powers.
Pluto has already lent £120 million for schemes with a development value of £170 million in the past 10 months. Including its mezzanine fund, it has financed schemes worth £460 million. These include a loan of £24 million for a 111-unit scheme in Surrey Quays and a £12 million loan for a 36-unit scheme in West Hampstead, London.
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