Property Development Finance for Client with Little Experience
The Client: A professional property renovator, our client came to us having completed some major property conversion and refurbishment works. At the time, he didn’t own his own home.
The Properties: A ground-up development of eight bungalows in the outskirts of London. These would be finished to a high-specification and, therefore, highly desirable properties on sale and rental markets.
The Finance: With some money set aside for the land purchase, our client sought development finance to cover the remainder of the purchase costs and development works.
The Challenge: The main challenge with this case was finding a lender happy to offer to a client with no previous experience on out-of-the-ground development projects. Lenders typically like to see applicants with some involvement in similar projects to ascertain that they have sufficient knowledge of what the project will involve, or at the very least the necessary connections with others in the industry who can assist.
The second challenge was that although our client had a deposit to purchase the land, it was not quite enough to satisfy a development lender loan to value requirements. Therefore, we'd have to find a way to help our client make up the difference if the project was to go ahead.
The Solution: The first challenge to solve was the shortfall in our client’s deposit. Having dealt with a few cases like this before, we approached a mezzanine funder to secure a short-term loan to make up the difference. This facility would also be repaid upon the sale or remortgage of the properties.
In order to overcome our client's lack of experience in ground-up development, we'd need to utilise our extensive knowledge of development lender requirements. We were confident that his previous conversion and refurbishment experience would be enough to reassure lenders. By putting together a portfolio of our client’s work, we proved to lenders that his experience with heavy conversions put him in a good position for this project. Not only did it show similar experience, but it also demonstrated that our client had the right contacts to complete the project to a high standard. See the property details below:
Property Details
Property Values: £3,445,000
Loan amount: £2,143,000
LTV: 62%
Rate: 7.25%
Term: Two years, interest rolled-up
Lender arrangement fee: 1% (£22,340)
Application: Limited Company
Consultant: Paul Keddy, 01732 471655
18th March 2022
