Frequently Asked Questions

About Hilltop

Who is Hilltop Credit Partners?

Hilltop is a private specialist capital provider to residential real estate developments in the UK. Founded by Paul Oberschneider in co-operation with Round Hill Capital, the company launched in 2019 and started funding in January of 2020.

What makes Hilltop unique as a lender is the established track record of both Round Hill Capital and Oberschneider as developers and investment managers in the residential space for nearly 30 years, generating high risk-adjusted returns for some of the world’s leading institutions and private investors.

What type of credit does Hilltop provide?

Hilltop provides a single-tranche development finance facility to residential real estate developers. Our product effectively encompasses the senior, the mezzanine and part of the equity under one agreement. We back SME developers who know their local markets, and have financial and emotional skin in the game.

As a credit provider, we have security over hard assets, and the way our product is structured allows us to benefit from some of the equity upside. We believe that in the current market environment, having a debt product with equity characteristics is appealing.

What attracted you to private credit for residential development?

Given where we are in the real estate cycle, Hilltop felt the risk-adjusted returns were arguably better in credit than in equity, which offers less downside protection.

How does Hilltop underwrite deals?

Hilltop is not a tick-box lender and underwrites each deal through a strict project analysis and due diligence process before agreeing terms. Real estate development lending is a complicated process and requires a comprehensive understanding of how a borrower will execute from acquisition, through completion and sale.

How much does Hilltop plan to invest in the UK?

Hilltop estimates the addressable market to fund in the UK to be ~ £200bn over the next ten years. The alternative lending space to date has been a fraction of total demand for capital. Since January of 2020, Hilltop has committed nearly £50m and given its current pipeline, believes it should be able to fund ~£120m by year end.

What differentiates you from other lenders?

As a lender, Hilltop looks at each project from an equity point of view, considering the project’s location, build cost, and valuation, among numerous other factors. The depth and breadth of our development experience and expertise in successfully and responsibly investing in, developing and managing residential real estate set us apart from other platforms.

Our off-market deal sourcing and nimble investment model is based on our knowledge of real estate development, supported by the broader experience of Round Hill Capital. Round Hill Capital resources provide Hilltop with a fully integrated, in-house investment, asset and development management expertise.

Is it proving hard/competitive to originate deals?

Since it was established in 2019, Hilltop has spent considerable time getting to know the UK residential developer market and has a growing pipeline of investment opportunities in the residential development space. Much of the pipeline is organically generated but also Hilltop uses selected brokers to introduce deals.

Does Hilltop work with brokers and introducers?

We like to build relationships with our developers hence we only work with a handful of carefully selected brokers and introducers.

What is the solution to the UK housing problem?

Part of the solution is encouraging more of the right kind of supply in the most appropriate locations. The large funding gap in the market has helped multiply the structural shortage of housing. The UK requires nearly 300,000 new homes per year, yet supply has been significantly below that.

The reality is that private and state investment have a role to play in helping to resolve the housing crisis. SME developers who historically built nearly 40% of homes in the UK are building just 10% today and need support through better access to capital.

What is your relationship with Round Hill Capital?

Hilltop is the credit arm of Round Hill Capital, a real estate investment and asset manager to some of the world’s leading institutions and private investors.

How do I get in touch with Hilltop?

Email us at info@hilltopcreditpartners.com or alternatively, give us a call on +44 (0)203 903 6369 to have a chat with one of our team members.

Investment Criteria

What does Hilltop look for in a developer?

We want to work with developers who are experts in their local markets but need access to attractive capital to effectively scale their projects. We look to work with established small to mid-sized UK residential developers with demonstrable track records of building and selling residential developments.

What does Hilltop look for in a project?

We fund mainstream housing and alternative residential accommodation, including student housing and supported living. We focus on areas of England, Wales and Northern Ireland with strong supply/demand dynamics. As a general guide we look to fund projects requiring a loan size of £5 million to £30 million.

What’s Hilltop's due diligence process?

We’re looking for great operating partners so first and foremost we start with the development team. The project comes second. After an initial meeting and receiving your appraisal we’ll run our own numbers and issue an ‘Agreement in Principle’ (AIP) with our key terms. We’ll then create a short form internal memo followed by and indicative term sheet. If agreeable, we’ll then validate with our valuers and quantity surveyor before formally approving the deal. We’ll work with you at every stage of the process to ensure you remain informed and the result is win / win.

How fast can I get a decision?

We aim to get an ‘Agreement in Principle’ (AIP) to you in under a week so you can go out and secure your site quickly. The entire end to end process tends to take 6-8 week depending on the project.

Does Hilltop fund mixed use of commercial schemes?

Primarily we fund residential projects, however we will consider mixed used schemes. At present we don’t fund developments that are purely commercial.

Does Hilltop fund projects where the developer is also the contractor?

Having the professional experience of being a builder can enhance the project returns so we assess these deals on an individual basis.

What size loans does Hilltop fund?

As a guide we look to fund projects requiring a loan size of £5 million to £30 million.

What fees are involved?

2% arrangement fee and 1% exit fee.

What’s the interest rate?

From 8% on drawn capital, rolled up and paid at maturity.

What’s the loan term?

12 to 24 months

Does my project need planning permission?

Yes, although we can proceed with a loan application while planning permission is pending.

The impact of Covid-19

Do you still have the appetite to deploy capital in the market?

We want to work with developers who are experts in their local markets but need access to attractive capital to effectively scale their projects. We look to work with established small to mid-sized UK residential developers with demonstrable track records of building and selling residential developments.

Are all your co-investors and JV partners still committed to lending?

We continue to speak with potential JV partners and investors who share our view on the continuing attractiveness of future investment and remain committed to finding high-quality assets in the residential build-to-sell and build-to-rent sectors.

Do you think there will still be strong demand for your product amongst developers?

There is clearly a period of ongoing uncertainty, but we remain confident in our strategy which is driven by two key fundamentals — the structural shortage of housing, and the large funding gap in the market. Areas of the residential housing markets in the UK continue to suffer from persisting structural supply constraints, which will mean continuing strong demand for high-quality housing development for the long term.

Has pricing changed?

There is clearly a period of ongoing uncertainty and Hilltop has been able to re-price and secure better protection on our underlying development loans through higher contingencies, more sponsor equity and guarantees.

Do you fear a downturn in the market?

The short-term measures introduced by the Government were a sensible response to what is an unprecedented crisis. We think that longer-term, the Government will do whatever it feels will be most likely to stimulate the supply of new homes.

What health and hygiene measures have you introduced to manage the Covid-19 risks?

Hilltop’s top priority remains the health, safety and welfare of our employees, partners, supply chain, borrowers, and wider stakeholders, whilst protecting the long-term value of each project.

We are complying with the guidance of the authorities in all the markets in which we have development projects. Where that has required stopping construction, then projects are on hold; where construction can continue, we have worked with our contractors to ensure social distancing rules can be adhered to. Our prime aim is to ensure that everyone working on our projects stays safe.

Our aim is to use innovation in operations to protect site operatives and their families, while keeping the economy moving and delivering projects for end users.

Risks

What if the project overruns?

We keep an ongoing open dialogue with our developers throughout the course of the project. As developers ourselves we understand that projects can experience delays, so we work collaboratively together to find a solution.

 

What if the market drops?

The UK property market is constantly evolving. Our team have successfully managed deals through challenging market cycles. Our due diligence process allows for market fluctuations to ensure we don’t put ourselves or our developer partners under unnecessary risk.

What if I face unexpected issues with the project?

The benefit of working with Hilltop is that we’re partners on the project. We have over 25 years of property development experience and have a vested interest in the project’s success. As a result, we’re in constant communication with our developer partners. If you have any questions throughout the course of the project, then our team are just a quick phone call away.

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Hilltop Credit Partners Limited is an appointed representative of Thornbridge Investment Management LLP
which is authorised and regulated by the Financial Conduct Authority
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Updated April 2020 - UK Residential Real Estate Market Review 2020
Essential data for property developers and investors alike

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