Q&A – the largely untapped market for British lending abroad

When it comes to investing in developments and resorts abroad, UK-based development firms might be concerned about finance and how to go about securing it in the country in which they are looking to invest.

But according to Charlie Armstrong, co-founder of LEXI Finance, debt and equity advisers for pan-European property investment and development projects, British developers could be missing out on great opportunities abroad by a lack of awareness surrounding their ability to use British lenders when it comes to funding projects.

Here, we discuss the pros and cons of such an approach, the impact of Covid and LEXI’s plans for the future.

Can UK-based developers or investor-developers use British lenders to invest abroad, especially in places like Spain and Portugal?

Increasingly, the answer to this question is yes, especially for loans above €30 million. Certain British debt funds have recently ramped up their European investments as they see opportunities to secure debt at higher interest rates and lower loan to values than they can achieve in the UK.

British investors looking at commercial real estate assets therefore now have options to use these lenders.

Areas like Spain and Portugal are particularly attractive because the recovery process is deemed to be more lender-friendly than elsewhere on the continent where repossession can be tricky.

What are the rewards and potential challenges involved with this?

For a lender, it’s typically a riskier investment, as the markets, whilst fast-growing, aren’t as established as the British market. As with any investment, where there is a risk there is a corresponding reward, which is typically more attractive than can be found on our own shores.

Lenders are increasingly seeing European investments as a way to diversify and spread risk, especially whilst the UK market is increasingly competitive.

For British borrowers investing in European commercial real estate, the ability to borrow from a British lender under English law is invaluable.   

Why don’t more people know about this route of investment?

It is simply a less sophisticated market with less options for funding. Hopefully we can help more investors become aware of the improving funding opportunities.

Post-Brexit and post-Covid, will there still be a demand for resorts, villa complexes and apartments in places like Lisbon, the Algarve, Barcelona and the Costa del Sol.

Spain and Portugal have traditionally been popular destinations for Brits and I expect this to return post-Covid. The governments of these countries are both aware of this and the role tourism plays within their economies, hence the ‘golden visas’ they currently offer to attract inward investment.

We’re currently working with British developer-clients looking to develop property in Spain with British holidaymakers, second-homers and retirees in mind.

Can you tell us a bit more about LEXI Finance and what you do?

LEXI is a real estate capital advisory structuring bespoke funding solutions for professional developers and investors.

We work with property clients undertaking all types of projects and deliver bespoke funding solutions for them.

Our lender relationships and market expertise allow us to navigate the fragmented lending landscape to deliver the best possible result to our clients.

What are your main goals and ambitions for the next five years?

We have a strong client base we want to continue to support for years to come with best in class funding advice. We’re constantly striving to improve our knowledge and lender relationships.

So, in five years’ time, I want LEXI to continue to be associated with the most notable real estate funding mandates across the UK and Europe.    

Alongside our business goals, we want to continue our drive for corporate responsibility. We plant 233 trees per transaction completed through our partnership with Treesisters, so by 2025 I’d like LEXI [to] have been responsible for at least 100,000 new trees.

How was your business impacted by Covid?

We struggled at the start as Covid-19 hit when we’d just paid for expensive new offices we immediately couldn’t use!

Although it was tough for many, we were able to structure about £40,000,000 of CBILS government support loans for our Covid-impacted clients meaning we were able to help them through the worst parts.

Since then, the market has rallied, and we’ve seen a lot of opportunistic activity.

If you could introduce one innovation into the development/investment world that everyone would take up, what would it be? 

All developers and investors should speak to LEXI for funding advice!