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Our client, an experienced property developer, approached us to arrange development funding to build four new residential units. A ‘Joint venture’ collaboration with a previous funding partner had collapsed, and he required a new package to allow him to complete the project.
The case presented a number of initial challenges. First and foremost, the total funding package required was larger than the standard Loan to Gross Development Value parameters. Although the client had equity in the form of a previous development, it had not yet been sold, and the client was, therefore, unable to make a cash contribution to the new development at the time.
In addition, the size and location of the properties the client was planning to build created a challenge when sourcing a lender.
Despite these challenges, we were able to find a funding solution for the client that enabled them to proceed with the development of the four residential units. We leveraged our extensive experience in arranging large and complex development finance and our strong relationships with a range of private banks and specialist lenders to assist.
After taking all aspects of the client’s circumstances into account, we ascertained that before arranging funding, the client would have to release the equity from a previous development. In addition, he would have to secure a price reduction on the consented site.
Over the coming month, we worked closely with both the client and lender. We demonstrated to the lender that this was a profitable project by presenting a strong case. As a result, they were willing to wait for the client to release the equity from their previous project to inject into the new development.
In addition, following the valuation survey, terms were offered against a slightly reduced end value, securing the price reduction the client needed. These were the two things the client required to achieve the funding.
However, there was still a gap in the finance required to meet the initial purchase price. Again, we quickly put a mezzanine funding line in place for the client, to cover the shortfall.
After much patience from both our client and the lender, we were able to put all the funding in place to enable our client to proceed with the development on competitive terms.
|Loan amount:||£2.4 m - Senior development funding |
£500,000 - Mezzanine finance
|Rate:||7.5% - Senior development funding|
|Type:||Interest Only - repayment on sale|
|Loan purpose:||Development funding|
|Lender’s arrangement fee:||1.5% of the loan amount|
|Exit fee:||1.5% of the loan amount|
This case study is for information and illustration purposes only. It is not an offer, or suggestion of an offer. Each mortgage case is assessed on an individual basis and there is no guarantee that the solution described here can be repeated in the future.
Please note that this specific deal may not be available to – or suitable for – all customers, dependent on their individual circumstances. The rate quoted may become out of date at short notice and may not be available at the point at which customers enquire about it. This document may not contain all the information needed for customers to make a decision and they should seek advice.
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