DEVELOPMENT

FINANCE

 

 

as a leading broker for development loans in both the UK and Europe, we focus on responsive service, unbeatable rates and total reliability.

 

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DEVELOPMENT FINANCE

Development Finance on Ferris Wheel

UNDERSTANDING YOU, THE CLIENT.

 

We take time to fully understand our client’s property project and business requirements. Our goal is to provide industry leading, creative and bespoke finance for the capitalisation of a diverse mix of asset classes across the capital stack. From senior ground-up development loans to stretched senior permitted development/conversions, no matter what your finance requirements, we guarantee to get you the best deal out there.

As a specialist development finance broker, we strive to add value by leveraging our granular knowledge and deep experience of the market, to source the optimal financial package from our database of over 150 development lenders, including our exclusive network of family office and HNW investors. We keep our client’s specific requirements at the forefront of everything we do, ensuring no piece of the puzzle is overlooked. We firmly believe – “your success is our success”. Get in touch now to see how we can take property business to the next level.

TAILORED FINANCE OPTIONS

 

A tailored short term funding package can be arranged for all sections of the capital stack – whether the requirement is for regular senior development finance, mezzanine finance, hybrid stretched senior development finance or a bridging loan to acquire the land or change the planning; we are sure to have a solution that meets your development finance needs

We can arrange an extensive range of loans for all types of ground-up development, new build and reconfiguration projects i.e through the use of permitted development of commercial property such as offices. For example:

  • 90% loan to cost stretched senior; keep all profit
  • 100% development finance with profit share
  • Stretched senior up to 75% gross development value (gross development value gdv)
  • Mezzanine finance up to 75% Loan to gross development value
  • Hybrid mezz/equity for higher LTV’s
  • JV/Equity to sit on top of senior debt
  • Bridging loans for acquisition
  • Development exit bridging loan
  • No PG/Company debenture option
  • Venture capital for planning gain plays
  • New developer starter finance

DEVELOPMENT FINANCE & PROPERTY DEVELOPMENT FUNDING IS TYPICALLY AVAILABLE AS FOLLOWS

 

  • UK + Ireland and parts of Western Europe.
  • Maximum LTC: up to 100%
  • Minimum Loan: £200k
  • Maximum LTGDV: up to 75%
  • Maximum Loan: none
  • Rates: from 4.99% PA
  • Term: up to 48 months +
  • No PG or Debenture Option
  • Option for first time developers.

 

RESIDENTIAL PROPERTY LOANS

 

When applying for residential property development finance, there are six key areas that lenders will take into consideration, whether a new build or a conversion: borrower profile (both experience and net worth), project feasibility, project GDV, project build cost, planning status and how much cash or equity you have to contribute to the scheme.

Funding is typically available as follows:

  • UK + Ireland and parts of Western Europe.
  • Maximum LTC: up to 100%
  • Minimum Loan: £200k
  • Maximum LTGDV: up to 75%
  • Maximum Loan: none
  • Rates: from 4.99% PA
  • Term: up to 48 months +
  • No PG or Debenture Option
  • Option for first time developers.

COMMERCIAL DEVELOPMENT LOANS

 

There is a wide array of different types of commercial development project, from office blocks and hotels, to care homes and industrial units. Often, due to the relative risk of these schemes, the lender will ask for some form of secured exit strategy before they will lend the money i.e a lease agreement from a company with a strong covenant, or a commitment from an established hotel operator. We can also arrange commercial mortgages or medium/long term whole loans and mezzanine funding if holding as an investment. Get in touch to discuss the options.

Development Finance is typically available as follows:

  • UK + Ireland
  • For Western Europe, loans over £10m.
  • Maximum LTC: up to 85%
  • Minimum Loan: £200k
  • Maximum LTGDV: up to 70%
  • Up to 100% of refurbishment cost
  • Maximum Loan: none
  • Rates: from 5.75% PA
  • Term: up to 48 months +
  • Senior term finance and whole loans also available from <2%pa

IN ORDER TO FULLY UNDERSTAND THE PROJECT AND THE FUNDING REQUEST, WE WILL NEED:

 

  • High level executive summary of the project
  • Business CV/bio of financial sponsors
  • A copy of the valuation, if there is one.
  • Planning consent information
  • Development appraisal/budget
  • Cashflow/schedule of works
  • Any CGI or drawings
  • If a leasehold; tenancy schedule and lease terms
  • Exit strategy and end value assumptions
  • Marketing and sales strategy

 

FINANCING FOR PROPERTY DEVELOPMENT TIPS

MAKE SURE YOU DO YOUR RESEARCH

 

The golden rule of any property development project is to make sure you leave no stone unturned in your initial due diligence. Which are the up and coming areas? If there’s a big university in the area, where do the students live? Where are the good schools? Does it have adequate public transport? For larger and more complex schemes, a feasibility study will need to be conducted by a major surveyor, in order to ascertain a detailed understanding of the local micro factors and larger macro factors that could affect the project’s viability.

This way you won’t be building a luxury property in an area that really needs affordable homes for first-time buyers or key workers, or building student accommodation in an area that already has an oversupply.

BE REALISTIC

 

 

  • Be realistic, on everything. Hope for the best but always plan for the worst.
  • Be realistic on your experience level. If you attempt to get development finance for a property project that is far outside your previous experience, then the chance of success will be slim.
  • Be realistic on the value assumptions that you make. Most RICS surveyors won’t share your optimism, and the hoped for value by the local estate agent also has to be taken with a pinch of salt.
  • Be realistic on the cost. Again, hope for the best, but plan for the worst. Most lenders will require a 10% contingency added to the costs and will require a quantity surveyor to look over your estimates.
  • Be realistic about how long it takes to get development funding. Finance can take up to 3+ months for highly complex large scale developments. For smaller developments, 6 weeks is achievable for the average property project.

USE AN EXPERIENCED DEVELOPMENT FINANCE BROKER SUCH AS LOANX

It is almost impossible for anyone other than an experienced specialist development finance broker to truly take advantage of the opportunities found in such a fragmented finance arena. There is a myriad of specialist lenders, small niche lenders, private investors, family offices, hedge funds, venture capital firms, private equity funds, peer to peer networks and banks. Without being fully immersed in the sector, you would never know you are getting the best finance option possible for your property project.

Of course, there are other benefits when you use our services. The huge amount of documentation required for a development finance application can be daunting. An experienced broker such as LoanX will prepare a professional funding memorandum to ensure your property project is seen in the best light possible by the lender, ultimately saving time, money and effort.

PLANNING PERMISSION

 

When borrowing to convert former commercial properties to residential, it is often possible to take advantage of specialist planning consent via Permitted Development Rights, especially if the work is internal only. Although consent is still required, it is much easier to attain than submitting a fresh planning application.

If you do need planning permission, it is advisable to arrange it before looking for funding, as most lenders will require sight of the consent before they will review the lending proposal.

JOINT VENTURE WITH THE LANDOWNER

 

If you are fortunate enough to know a landowner who owns land whose use could be changed for new build development, then pitching a JV to them could be a lucrative option.

If you bring an unencumbered plot of land with planning to the table, most lenders will offer development finance up to 100% of the build cost. It’s up to you then to negotiate with the landowner on the profit split.

TAKE CARE WHEN CHOOSING A MAIN CONTRACTOR

As well as carefully reviewing your credibility as a developer, the development finance property lender will also pay close attention to the main contractor, both their financial strength and their experience in delivering schemes of a similar nature and scale in the recent past.

The lender will want to ensure that the main contractor is:

  • Experienced in the type of construction method that you are proposing
  • Is used to working at the scale you propose
  • Is familiar with any unique challenges your scheme may face i.e listed building or non greenfield construction
  • Has 3 years of profitable accounts and a strong balance sheet
  • Has cashflow sufficient to float 1 or 2 months costs if necessary

PLAN YOUR EXIT STRATEGY

 

You may wish to hold the completed asset as an investment, so refinance is what you will be looking for. If that is the case, then the lender may ask for evidence that the completed project meets the exit finance providers criteria i.e a mortgage agreement in principle (AIP).

If selling or leasing a commercial asset, you may be asked to provide heads of terms or a letter of intent from the proposed end user, such as the lease agreement for an office, or the contract for a hotel operator.

However, if you are looking to sell the completed development scheme once built, then there are several options available, such as the off plan presale to a local housing authority or a specialist block purchase buyer, often “forward funded.

Whatever the development exit route chosen, be sure that you have done your research.

 

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LoanX is a trading style of Tiger Financial Ltd, a company registered in England and Wales, who provides financial services to property investors and developers seeking bridging loans and development finance. Tiger Financial is directly authorised and regulated by the Financial Conduct Authority. Your home may be repossessed if you do not keep up with your loan repayment. All rights reserved. Registered in England since 2001.