Development
Finance

Development finance will encompass all new build projects and large scale conversions, whether that is for houses, apartments or commercial/mixed-use schemes.

Development funding can be for new builds – whether a single house, a multiple unit house project or for apartment blocks. It can also be used for conversions of property such as commercial to residential under permitted development rights or from larger single unit residential properties into HMOs or individual flats.

This type of lending is assessed on a case by case basis and no two applications are treated the same. Funding can be by way of senior debt finance, stretched senior finance or in a combination with mezzanine finance and/or equity finance. Our bespoke service ensures that we will find the right financial structure for the client profile, property location and scheme details.

Case study

Senior
Debt

Our developer client acquired a former NHS building in Suffolk, which had planning permission for a complete demolition and rebuild as student accommodation. The developer had designed a sympathetic proposal that took advantage of all their key local knowledge. They had put together a plan with the local university to enhance the scheme and to increase the number of units to satisfy the growing local demand.

Funding requirement: the developer required a senior debt facility to provide 75% of the total costs of the development scheme being purchase costs, build costs and associated professional and finance costs. The client was prepared to put in the balance of the costs from his own resources to keep the interest rate payable to 7% p.a.

Facility provided: we sourced a senior debt facility to over the 75% of cost requirement and in this instance the client paid a 2% lender entry fee, a 1% lender exit fee and a fixed interest rate of 7% p.a.

Case study

Stretched
senior debt

We were acting for an experienced developer looking at a well-located opportunity in the Croydon area. The client’s asset and liability position was strong and they had good experience of developments of this size and nature.

Funding requirement: ordinarily, the client would be able to source normal senior debt funding but, in this case, they had cash tied-up in other projects. Therefore, they needed to ‘gear up’ on this site as much as possible.

The scheme itself was the conversion of a vacant warehouse and office building, which was being developed under permitted development rights. The completed project would be for 20 apartments with a finished value or GDV (gross development value) of £8m.

Facility provided: we were able to structure a facility for the client that covered 85% of the total project costs including purchase, conversion costs and associated fees with a lender entry fee of 2%, a lender exit fee of 1% and an interest rate of 8% p.a. for an 18 month term.

Case study

Senior debt plus
equity/mezzanine funding

Our client was looking to purchase a site in Milton Keynes for £10m which had consent for 100 plus residential units. They were very active developers and had six other sites under construction, which had caused a drain on their cash resources and the equity that they could inject into this transaction.

Funding requirement: the development appraisal set out total costs of £17m against a GDV of £26m. We were instructed to source the full costs of the project on the most favourable terms for the client without them having to inject any significant cash into the costs.

Facility provided: we negotiated a structured finance deal with a senior debt lender providing £13m and an equity provider funding the balance of the £17m costs. The senior debt had standard pricing terms and the equity partner agreed a fixed coupon for their funds of 20% rather than a profit share as this was the client’s preference.

Development Finance

Investment Finance

Short Term Finance

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