With winter firmly upon us, many of our clients are taking to the mountains of Europe to enjoy another season on the slopes. From Courchevel to Klosters, winter resorts remain as popular as ever—but with the best lodges and hotels getting booked up early, we’ve seen an increased demand from clients looking to purchase a place to call their own. And typically, our clients want to truly make the properties their own by either refurbishing or securing construction finance in the Alps.
Fortunately, this is something we can assist with. We can arrange finance for 100% of both the purchase and construction, as you can see from the case study by co-head of Enness International, James Ashe. We are typically also able to secure these facilities on an interest-only basis, which is highly desirable for many of our clients. These loans can also be renewable.
There’s one particular lender we have built a very strong bond with; we’ve worked with them on a number of occasions in the last year to secure extremely competitive interest rates for our clients. Our relationships also mean we can move quickly and speed the process up, which is often a very important point for our clients.
There are several key considerations for those trying to arrange construction finance in the alps. Firstly, you should ensure the money you plan to spend is actually adding to the value of the property. The project cost needs to be in line with the gross development value (GDV). It’s more challenging to secure a large sum for a purely aesthetic overhaul, for example, if it isn’t going to significantly change the value of the property.
As any keen skier knows, location is key—but we’ve seen an interesting trend in which valuations have been strong in areas that haven’t been showing a recent history of good snow. For skiing resorts, this seems worrying; Megève hasn’t seen good snow for several years, but valuations are still coming back as positive. This is a risky game. Spots such as Courchevel 1850 and Meribel are far better bets.
Timelines should also be kept realistic. Securing the right permits isn’t easy, and in our experience, there are often logistical difficulties with arranging construction finance in the Alps and Europe as a wider area. Projects often take longer to complete than clients expect, so be wary of your budget.
Akin to borrowing across the rest of Europe, securing development finance in the Alps can be a challenge for clients from a range of nationalities. This is where Enness has the advantage; our close relationships with lenders allow us to secure facilities for clients whose nationalities have barred them from borrowing elsewhere.
Another potential pitfall is Assets Under Management (AUM) requirements. Generally, you’ll need to place at least 25% of the global loan amount—the gross loan—as assets under management (AUM) for the duration of the facility. The entirety of this amount typically needs to be transferred on day one of the loan. This is an expectation we feel it’s important to manage; clients from the UK and America are often less accustomed to placing AUM, so this can be a sticking point. However, whilst we have managed to negotiate lower rates of AUM for clients in the past, this will be a requirement from European lenders most of the time.