Stretched Senior Debt Development Finance at 7.25% per annum

Deal Structure

• £2.9 million development finance facility
• 71% Loan to Gross Development Value (LTGDV)
• 90% Loan to Cost (LTC)
• Interest rate: 7.25% per annum (retained)
• 2% arrangement fee
• 1.5% exit fee based on the facility amount

Deal Summary

Our experienced developer client needed a higher level of funding than usual for his next project. A significant amount of his capital was already tied up in another development.

The client had been working on a 13-house development scheme in the Midlands for some time. Planning permission was eventually granted. However, the vendor then asked the client to complete the land purchase sooner than originally expected.

The increased funding requirement meant the developer initially considered using mezzanine finance alongside senior debt. However, we identified a specialist lender that could provide stretched senior debt development finance at the required level of leverage.

The lender was comfortable with the exposure because of the developer’s strong track record. Previous schemes in the local area also demonstrated the quality of the developer’s work.

We presented the opportunity to the lender, who issued a Decision in Principle within 24 hours. This gave the developer the certainty needed to move forward quickly with the land purchase.

The lender agreed a £2.9 million facility, providing 90% Loan to Cost and 71% Loan to Gross Development Value. The facility carried an interest rate of 7.25% per annum, with interest retained.

Following a satisfactory site visit, the lender progressed the application quickly. The entire process completed within six weeks of the initial presentation.

The Outcome

By sourcing stretched senior debt, we helped the developer achieve the higher leverage required without needing a separate mezzanine finance facility.

The £2.9 million development finance facility provided the funding required to progress the 13-home scheme while allowing the developer to preserve capital that remained tied up in another project.

This case demonstrates how stretched senior debt development finance can provide experienced developers with higher leverage when a standard senior debt facility does not provide sufficient funding.

If you require high-LTC development finance for a residential development, Positive Commercial Finance can help identify specialist lenders and explore senior debt solutions tailored to your project.