£2.29m loan facility to purchase and convert industrial premises

The client: A longstanding client who is an experienced landlord and property developer. He has a very large, mixed portfolio which includes hotels, commercial property and buy to let investments.

The project: The client was looking to purchase old industrial premises located in a popular Buckinghamshire town.

The site itself is made up of numerous property titles, some with limiting covenants, although full planning permission had been granted to convert it into 12 two-bed flats and two three-bed town houses.

The vendor wanted to sell to a buyer who could complete the purchase quickly.

The finance: We needed to source a lender which not only has a very good understanding of complex property deals but also could work to the tight timescale.

Also, the developer required finance to cover not only most of the conversion work but also as much as possible of the acquisition itself. Most lenders will go up to 75% LTV and our client was looking for better terms.

We took the deal to Aldermore Bank because its expert development finance team already knew the client and us well from previous, successful projects.

Aldermore agreed to lend the funds required because the overall loan to value would be less than 60% of the anticipated Gross Development Value.

In some circumstances this type of deal might be classed as ‘stretch finance’ but in fact the terms for the 12-month facility offered reflect standard pricing. In this instance Aldermore were pleased to lend 65% of land purchase and 100% of all development costs and professional fees.

The first tranche of funds were released in May allowing the client to complete the purchase. The building work has commenced with further funds being drawn down monthly subject to sign off by the quantity surveyor.

It is anticipated that the first batch of residences will be ready for sale by January 2017.

Site purchase price: £1,175,000

Build costs: £1,432,000

Gross development value: £4,040,000

Loan facility: £2,294,000

LTV: 57% of GDV

Rate: 7%

Term: 12 months

Facility fee: 2% of loan amount (£45,880)

Exit fee: 1.5% of loan amount (£34,410)

Consultant: David Whittaker, 01732 471601