Raising £3.3m in 6 weeks for office-to-flats development

The clients:

Four directors of a Special Purpose Vehicle (SPV) limited company formed in November 2014 especially for the project. The SPV has £1.7m to invest.

Property development experience:

All four directors are experienced developers and investors in their own right. They have also worked together previously developing similar properties in West London.

The project:

Purchase of a commercial office block in Richmond-upon-Thames with planning permission to convert into ten residential apartments. Originally the offices had been owned by a bank and operated as a business centre but this had proved unprofitable so they sold the premises without planning permission to developers. The property is close to the station. Architecturally it is well suited to conversion into apartments and has plenty of parking space.

The funds were needed quickly because a 6-week timescale was a stipulation of sale by the vendors who needed finance for another project. (The vendors had purchased the building without planning permission, which they subsequently got. This increased the property’s value enough for them to make a £500,000 profit without having to develop it themselves).

The developers agreed a price of £3.7m for the building. They could fund £1.7m themselves but required a further £3.3m for the purchase and subsequent development works. We approached a lender that not only works to tight timescales but is also happy to lend based on a percentage of the project’s Gross Development Value.

The challenge:

To find a lender that was willing to provide funds within a 6 week timescale to facilitate the purchase and subsequent development.

Property purchase price: £3.7m

Build costs: £1.3m

GDV: £6.03m

Funds provided by SPV: £1.7m

Loan facility: £3.3m

LTV: 55% of GDV

Interest rate: 6.75%, 18 month fixed facility for purchase and development

Lender arrangement fee: 2% of the loan amount

Lender exit fee: £66,000

Loan completion: December 2014

This is just one example of how I've helped a client secure property development finance. To see more of my case studies please visit my profile page. And if you have any funding requirements, please do not hesitate to contact me. My direct line and email address can be found below.