Pluto Finance, the residential development lender, has expanded its capital base with the backing of funds managed by Blackstone, Clearbell Capital and some of Europe’s leading institutional investors.
In a second fundraising in a year, Pluto Finance has raised GBP94m of equity, in addition to GBP100m of equity raised in May 2013. This gives Pluto Finance the firepower to lend GBP360m to residential development schemes in London and the south of England over the next four years as capital is recycled once developments are completed.
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 GBP10m. These loans provide significantly more capital to developers than traditional senior debt providers, enabling developers to kick start new projects and spread their equity across a greater number of schemes.
The equity raise represents a much-needed injection of capital into a sector which has been starved of traditional bank finance in recent years, and aims to “keep Britain building,” according to Pluto Finance CEO Chris Philp.
According to estimates from the Department of Communities and Local Government, the UK needs to build 235,000 new houses per year to meet demand. In 2013, only 122,590 new homes were started – still a significant shortfall.
Over the past 10 months, Pluto Finance has made stretched senior loans to fund schemes with a gross development value of GBP170m. Transactions included a loan of GBP24m for a scheme of 111 units in Surrey Quays in south east London and a loan of GBP12m for a scheme of 36 units in West Hampstead, north London.
Philp says: “We are delighted to have doubled our equity footprint. GBP360 m is a significant contribution to funding residential schemes, and, by offering up to 90 per cent loan to cost, we are helping developers make their equity go further. We are filling the gap left by the large number of banks that have withdrawn from the residential property development finance market in the last five years.”
Chad Pike, senior managing director at Blackstone, says: “We clearly see the difficulty that homebuilders small and large alike are facing in getting full funding for quality schemes with planning consents. Pluto's experienced team has impressed us with their ability to complete transactions quickly and to efficiently manage loan disbursements and construction oversight.”
Manish Chande, senior partner at Clearbell Capital, says: "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, and we at Clearbell are very pleased to be part of this venture.”