Photo Caption: Earl Samuels, Assistant General Manager and Chief Development Financing Officer at The Jamaica National Group speaking at the 2024 International Real Estate Conference (IREC) and Homeowners’ Expo at the Montego Bay Convention Centre
Earl Samuels, Assistant General Manager and Chief Development Financing Officer at The Jamaica National Group, said due diligence remains a key part of development financing and can increase a developer’s chance for a successful real estate project.
Speaking at the International Real Estate Conference (IREC) and Homeowners’ Expo at the Montego Bay Convention Centre recently, Mr Samuels explained that lenders, such as JN Bank, typically undertake thorough due diligence of the developers and the project before providing financing.
He said due diligence helps to uncover potential risks, such as any legal, financial, environmental, or physical issues that may impact the development.
Mr Samuels said the investigating process remains important to financiers, especially because of the level of risk associated with Development Financing. He noted that, depending on the risk profile of the developer, most financiers will provide up to 80 per cent of the project cost for residential developments, up to 70 per cent for commercial developments and up to 60 per cent where only the infrastructure is being developed for sale of lots.
“We want to make sure that the people who we are dealing with have the capacity and also the experience to successfully implement the project,” he said.
He said to help mitigate the risk financiers usually consider a raft of documents and reports, including presale agreements, to verify the demand of project.
“We also look at matters such as a company’s legal documents and if the company is tax compliant. We also look at the track record of the company. If it is a company that is newly formed, we look at who are the people behind the company; the directors and the shareholders and their experience in undertaking the type of business. We also look at the finances of the company, the audited financial statements or statement of affairs of the company, and statement of affairs for anyone owning more than 10 per cent of the company. We also want to ensure you have a proper business plan,” he shared.
He said the project teams are also heavily scrutinised to ensure that the professionals employed to projects are members of professional bodies that are being guided by standards.
Additionally, Mr Samuels shared that financiers usually ensure that all the relevant approvals for the development have been received and that all the requirements of regulatory authorities have been satisfied.
“We want to ensure that the land on which the project will be built has a title and that restrictive covenants are being observed. We also require a surveyor’s ID report for the property and sometimes we might require a soil test, depending on the type of structure you are planning to build on the land, to determine the weight bearing capacity of the area where the project is to be built,” he said.
Mr Samuels said the relationship with financiers also extends beyond approvals, as during the implementation stage, they also conduct monitoring activities to ensure projects are rolled out in accordance with approvals.
“Remember, it is the depositors’ funds which we are lending, so we have a fiduciary relationship and responsibility to ensure we lend wisely. We have to ensure that the real estate sector develops in an orderly way and we are here to support you and to give you the guidance you need,” he said.
Mr Samuels’ presentation was made on day two of the IREC and Homeowners’ Expo, in a session looking at the “Financing of Real Estate Developments”. JN Bank was a sponsor for the second staging of the Expo, which was held under the theme: “Destination Jamaica: The Future of Real Estate”.
