£10m fund for North East property projects

£10m fund for North East property projects

A brand new £10 million property fund is being aimed at supporting smaller scale North East construction and property development projects in the North East.

Conceived by FW Capital, the investment company based in the North of England, they now manage the North East Property Fund, backed by Santander and the North East LEP and held by NPF 2016 Ltd, a special purpose vehicle set up by directors Michael Smith and Geoff Hodgson for this purpose.

The North East Property Fund has been created in response to strong demand from smaller construction and property development companies who are unable to access mainstream finance from traditional sources, and aims to kick start development in smaller scale property ventures across the North East.

Like other regions in the UK, smaller construction and property development companies have struggled to access finance from traditional lenders, leading to a new-build deficit in residential and commercial properties. This has in turn led to housing shortages in the area.

In terms of the North East itself, an estimated 6,440 homes were built last year vs an annual target of 9,000; only 1,420 of the 3,800 target for affordable homes were built in the region; this shortfall is compounding the legacy deficit year on year.

The fund will provide loans from £250,000 to £1 million for non-speculative residential and commercial developments in Tyne & Wear, Northumberland and County Durham. Typical repayment terms are between nine and 18 months.

“Santander is proud to support this new venture which will have a tangible impact on the local North East economy, including significant job creation,” said Stephen Carmichael, relationship director, Santander Corporate & Commercial.

“This is a brand new fund concept in the North East combining both public and private money to benefit SME property developers in the region. We were pleased when FW Capital approached us and the North East LEP about the fund idea. It’s a bold and compelling initiative that is confronting head-on the urgent need to deliver more new-build property.”

David Land, the North East LEP Investment Panel Chair said: "The North East Property Fund will tackle a pressing need identified in the region's Strategic Economic Plan to build more homes which in turn will help drive economic growth.

“Our ambition is for the North East to return to pre-recession housing rates of more than 6,000 new houses a year and this new fund provides smaller construction firms with the confidence to pursue projects to build vital new housing.

"A similar fund in Wales has had a proven impact and demand to access this type of investment in our region is strong."

The fund will operate on a commercial basis and by reinvesting returns into future projects it has the potential to provide over £30 million of finance into smaller developers over the next five years.