by Michael Hanley , Danny Heffernan, Catherine Jane O'Rourke July-13-2020 in Banking & Financial Services, COVID-19

Catherine Jane O’Rourke and Danny Heffernan recently wrote about the impact of Covid-19 on the efforts being made to address the housing crisis. We are glad to say many sites have since re-opened and construction work has re-commenced. The medium to long term impact of Covid-19 is yet to be fully ascertained, but it is clear from a real estate perspective that it will impact on property values and in certain respects, also on demand. However, in the immediate future, the lack of housing stock remains a core issue for the new Government and broader society.

The Hayes real estate finance team has considerable experience in the construction finance sector, with a key focus on the area of residential development. Having asked questions of and listened to responses from our clients (primarily lenders but also developers/borrowers and other key participants, such as project monitors), we have prepared a series of articles focusing on frequently-faced issues that arise on transactions of this nature. The series identifies solutions to those issues which can be stumbling blocks to reaching the point that lenders are sufficiently protected and satisfied to draw down the first tranche of funding, and to continue to release funding during the life of the loan in order to facilitate the ultimate delivery of units, and the lender being repaid. 

Using the old Benjamin Franklin (or Roy Keane depending on your persuasion) adage: ‘In failing to prepare, you are preparing to fail’. We will focus the first in our series of articles on the initial financing meeting attended by the respective legal teams. A huge amount of work will already have been done at this point by the developer/borrower in making its submission, and by the relationship manager in presenting the proposed transaction to Credit and preparing and issuing the Heads of Terms. We encourage our clients to engage with us as early in the process as possible, but in terms of building a collaborative, effective process between the lenders and the developer/borrower’s teams, this meeting is key. We advocate the inclusion in this initial meeting of the lender’s project monitor and members of the developer’s core team. Obviously in the current environment, such a meeting can be facilitated by electronic conferencing and ultimately this is less demanding on participants’ valuable time.

We intend in the remainder of the series to address specific issues we have observed arising on projects and to try and flag solutions that can assist in navigating these avoidable delays early in the process. The key to any successful profitable residential development project is delivery as close to projected timelines as possible and with the unfortunate delays caused by Covid-19 this has never been more important - time is money!

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