LONDON—Pluto Finance, a UK-based residential developmer, has significantly expanded its capital base with the backing of funds managed by Blackstone, Clearbell Capital LLP and some of Europe’s leading institutional investors.
In a second fundraising in a year, Pluto Finance raised $155 million (£94M) of equity, in addition to $165 million (£100M) of equity raised in May 2013. This gives Pluto Finance the ability to lend $597 million (£360M) to residential development projects in London and the south of England over the next four years as capital is recycled once developments are completed.
“We are delighted to have doubled our equity footprint. £360 million is a significant contribution to funding residential schemes, and, by offering up to 90% loan to cost, we are helping developers make their equity go further,” said Chris Philip, CEO of Pluto Finance. “We are filling the gap left by the large number of banks that have withdrawn from the residential property development finance market in the last five years.”
Pluto Finance provides developers with “stretched senior” loans of up to 90% of the cost of the development, with a minimum loan size of $16.5 million (£10M). 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 Philip.
Estimates from the Department of Communities and Local Government, indicate that 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.
“’We clearly see the difficulty that homebuilders small and large alike are facing in getting full funding for quality schemes with planning consents,” said Chad Pike, senior managing director at Blackstone. “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 LLP, commented: “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.”
Over the past 10 months, Pluto Finance has made stretched senior loans to fund schemes with a gross development value of $282 million (£170M). Transactions included a loan of $40 million (£24M) for a scheme of 111 units in Surrey Quays in south east London and a loan of $20 million (£12M) for a scheme of 36 units in West Hampstead, north London.
In addition to stretched senior loans, Pluto Finance also provides mezzanine loans for projects with a total cost of less than £10 million. In the last three years, Pluto Finance has provided mezzanine loans to projects with a gross development value in excess of $481M (£290M). The mezzanine loans will continue to be available for projects in London and the south.