| 10.9°C Dublin

Builders and banks gather for funding meeting

Close

Tom Parlon of the CIF

Tom Parlon of the CIF

Tom Parlon of the CIF

Dozens of wary builders will be asking tough questions of banks, private financiers and equity funds behind closed doors today.

Around 200 of Ireland's top developers and finance operatives are being brought together for the first time in a private brainstorming session organised by the Department of Finance. The event is being held to solve the finance hurdle at the heart of the housing crisis.

Finance Minister Michael Noonan and senior officials from the department will be at Dublin's Marker Hotel today for the event.

The Construction Industry Federation (CIF), which represents Irish builders, developers and contractors, claims lack of finance has long been a key reason why its members aren't building.

Financiers on the other hand, say builders and developers are not being realistic. A department spokesman recently asserted that some builders have been slow to accept the higher cost of equity funding which now prevails.

Accustomed to the Celtic Tiger finance model of 100pc cash up front, long-term repayments and interest rates under 6pc, developers who have been unable to get adequate finance from Irish banks have thus far been wary of private equity and of expensive mezzanine finance operators who can charge up to 20pc.

Profit

Finance offers on the table often involve a number of difference sources for one development. Typically a bank might provide up to 60pc with the remainder being made up of finance both from private equity and mezzanine financiers. Some developers feel they will end up with the status of contractor and without a profit cut.

Speaking ahead of today's special private session, Tom Parlon of the CIF said this form of finance was "new to developers who sought all their finance in a single loan from the banks".

He added that "key questions needed to be answered".

Among these are the sort of security sought on multi-party loans and for what length terms, the cost of approaching equity and mezzanine financiers for primary debt and the question of geographical "no go" areas or "blackspots" - parts of the country for which they will refuse to lend.

This contrasts to the days of "beermat" finance by some banks - so called for the occasional custom of working out terms at social meets on the back of beermats or cigarette boxes.

Irish Independent