£1.175m development loan to build 3 executive homes

The development: A parcel of land in a pretty Kent village which had been purchased for £625k by the client with his own funds and a substantial contribution from his father. The client had successfully gained planning permission for three 5-bed executive homes but needed £1m to build them. The anticipated Gross Development Value was estimated at £2.4m (£285 psf).

The client: The director of a newly created SPV limited company set up specifically for property development projects. The director is a full-time project manager employed within the construction industry.

Previous experience: None personally but many years’ experience with his job.

The challenge: To find a lender who would accept a borrower with no personal property development experience and limited personal funds.

The solution: We found a bank which agreed a facility of up to £1.175m (49% of GDV), to be drawn down in stages subject to architect's/quantity surveyor's sign-off. To support the facility the bank insisted on a limited (unsupported) Personal Guaranteed (PG) from the borrower's father. The lender determined that the PG and the client's work experience made the scenario a suitable risk, particularly as the client had chosen excellent contractors to carry out the build.

Construction commenced in the summer of 2013 and the first house was completed and sold by February 2014. The sale paid off the amount drawn down (not the entire facility). Then the client attained a residential mortgage in order to move into the second house. Pending the sale of house number three, which is now finished, the client is looking for his next project.