100% Development Finance due to deferred consideration

Deal Structure

£2.65m facility

68% Loan to GDV and 100% Loan to Costs

Interest Rate 12% per annum, rolled up

2% Arrangement Fee

1.5% exit fee, based on the facility amount

Deal Summary

Our experienced developer client had structured a deal with the landowner where part of the agreed purchase price could be paid at the “back end”, and after the lender had been redeemed. Initially the landowner suggested a Joint Venture, but that required the landowner to be party to the loan, which he was understandably reluctant to do.

The vendor was willing to take half of the land purchase price within 24 months meaning the incoming lender had to cover the other half on “Day 1”, and then 100% of the build costs, drawn in arrears. We were asked to source a Development Finance lender who would work on the basis of the borrower not putting any cash into the deal, other than professional fees and cash-flow to first draw-down.

This scheme for 18 houses in the South West is now underway and the developer is expected to reach practical completion within 18 months. Local agents confirm that the market remains extremely buoyant and a well-timed marketing approach should hopefully see some sales agreed prior to the houses being finished.

If it were not for the pragmatic decision making from the lender, this scheme might not have got off the ground. The developer was delighted to keep his team busy and looks forward to providing 18 quality homes for local families.