Full Development Loan for Client with Limited Experience
The Client: Having completed several property conversions and refurbishments and just one ground-up development, our client was a property developer with limited experience.
The Properties: Situated on the land surrounding her own home (which she owned), our client wanted to develop four detached properties with three to four bedrooms. They would be finished to a high specification and situated in a desirable location in the South of England.
The Finance: As she already owned the land, our client was only looking for a development loan to cover the costs of the works.
The Challenge: The primary challenge with this case was that our client was looking for a loan to fully fund the cost of works when her contribution was essentially the uplift in plot value following planning application. Typically, lenders will not consider the uplift in value with successful planning a contribution to the project.
Furthermore, while our client had completed several property renovations and one ground-up development, she was still considered inexperienced for a project of this size. Developer experience is a significant aspect of lenders’ considerations for cases like this, as the less knowledge someone has of the process, the higher the risk.
The Solution: In order to convince the lender that our client had the required CV to manage a development of this size, we gathered a portfolio of her previous refurbishments and one ground-up development property. All her previous refurbishment work was completed to a very high standard, as was the development project (situated near the new site), which had sold incredibly quickly.
In order to try and secure funds for the total cost of the development, we made the case that as our client had already purchased the land and secured planning, she already had a substantial investment in the project. Furthermore, she had a clear exit strategy, planning to keep three of the new properties as buy to lets and sell off one. Given the desirable location and high-end finish, the properties would all be in high demand.
Using our experience of packaging cases like this and our longstanding relationship with the lender, we secured the development finance our client required. Here are the details:
Property Details
Gross Development Value: £4 million
Loan amount: £1.96 million
LTV: 100%
Rate: 7% fixed for two-years, interest-only
Lender arrangement fee: 1% (£19,000 payable upfront)
Application: Individual
Consultant: Paul Keddy, 01732 471655
9th February 2022
