four key areas

The Borrower

We meet and personally get to know all of our borrowers

We meet with borrowers multiple times as part of our credit approval process, and at least one of those meetings will be with one of our Founders or a Credit Committee member. We also visit the property to get a better understanding for the proposed scheme's suitability.

Our borrowers need to demonstrate a strong track record of successful developments and we will visit their previously completed developments to evaluate the quality. We also undertake a detailed financial review of completed developments to check that they successfully delivered against the business plan.

The Property & the Market Next

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The Property & The Market

We get to know the local area to understand the project's suitability

Once we've gotten to know the borrower and are comfortable that they have demonstrated their ability to deliver, it's time to delve into the detail of the project and the property itself.

We analyse the local area and undertake reviews of market demand and comparative property data.

Property market conditions can affect the viability of a proposed project, so an assessment of the liquidity performance of the housing market in the area is key. Engaging with local market experts helps us to ensure we have the information and expert insight we need to proceed.

The Business Plan Next

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The Business Plan

We enlist independent professionals to validate our assessment of the property and project

When assessing a development project, our analysis will include:

  • The build method
  • Time scales
  • Planning requirements
  • Capabilities of the main contractor and professional construction team
  • Estimated costs.

Independent Chartered Surveyors are instructed to undertake a Royal Institution of Chartered Surveyors 'Red Book' valuation on every property we lend against. Our loan to value ratios will then be calculated from the values they provide. We use a panel of valuers which includes Savills, Knight Frank, Strutt & Parker and JLL.

For development schemes, we also instruct an Independent Monitor or Quantity Surveyor to perform a critical assessment of the project on our behalf. Their reports assess the fine detail of the proposed project plan, timelines and budgets to provide certainty that the project is realistic. Our Independent Monitoring Surveyor will work with us throughout the scheme to ensure that our interests are protected at all times.

The Financials Next

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The Financials

We assess the financial viability and structure of the project

Our final stage is to assess the numbers, to determine whether we think the project if financially viable, not only from our perspective, but also sufficiently profitable for the developer to ensure they remain committed to the success of the scheme.

Our proprietary evaluation model calculates key financial ratios for our Credit Committee to consider. These include:

  • Day 1 and final Loan To Value ratios
  • Gross development value per square foot
  • Break even pounds per square foot
  • Loan To Cost
  • Profit on cost.

We also assess the developer's financial appraisal and cashflows in detail to check their assumptions on sales prices, build costs, professional fees and other miscellaneous costs to ensure they have sufficient contingency

In reviewing the capital structure of the project to ensure it is fully funded, we always ensure that the developer's equity will be eroded first if things don't go according to plan. This means the developer will lose their equity prior to any CapitalRise investor losing their investment.

The Business Plan Previous

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The CapitalRise lending team

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Read about our selection process in Nick Oakley, our Head of Lending's blog post.

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