Development and Construction Funding Case Study
Development Finance – Case study 1
Our client had been trying for some time to arrange a loan to buy a redundant petrol station site in the West Midlands and to develop it into two blocks of 15 flats.
Despite the client’s attempts to find suitable funding, and even paying upfront fees to other brokers, he had been unable to find a lender. His main problems were that:
- One of the client’s business partners was a retired architect and the other was a retired estate agent. However, their experience was in renovation of existing properties and none of them had ever been involved in new build.
- Although the local authority had indicated that it would not object to a development of this size, there was no residential planning consent on the site.
Our consultant met with the client and immediately prepared a full presentation to one of our panel lenders.
The client met with the lender early the following week, when he disclosed he had to complete in 14 days. In less than five working days, the lender issued his formal offer to the client and the case completed within the 14-day deadline.
The units were subsequently built and successfully sold.
Development Finance – Case study 2
An architect and a “hands-on” bricklayer wanted to buy a site in Devon. The planning was a mixture of new build and conversion into five townhouses and one maisonette. The main problems were that
- Although the architect had been a professional for 20 years, he had no direct experience of development.
- The bricklayer had only worked on sub-contract and had never worked on a project where he was solely responsible for progress chasing and recruiting the contractors.
- The partners needed 100% funding of the site and build costs.
One of our consultants met with the clients on site and immediately recognised that what was needed was a sympathetic lender with local knowledge and a local representative with whom a meeting would be arranged.
First, the consultant prepared a full presentation which included the plans, full CVs of the partners, pictures of the site and build schedule. With the help of our consultant, the lender recognised the viability of the project, with the two partners offering complementary skills.
The lender agreed to lend £1m, representing 70% of the end value of the units and 100% of the project cost within one week. Work began on the site four weeks later.
Our consultants always keep a watching brief on their projects and some nine months later, we received a telephone call that there had been a problem with the ground works and another £100,000 was needed.
This took the total loan outside the maximum loan to value (LTV) allowed by the lender. Fortunately, because of our excellent and long-standing relationship with the lender, we were able to negotiate on the clients’ behalf and the lender released further funds to complete the development.
The site is now finished to a very high standard and most of the units are sold.
To find out more about how we can help you, please contact All Property Finance.