CBILS-Backed Development Finance Facility for Four Townhouses

Deal Structure

• £1.3 million development finance facility
• 58% Loan to Value (LTV) on Day 1
• 61% Loan to Gross Development Value (GDV)
• Interest rate: 9% per annum
• Interest covered by CBILS for the first 12 months
• 2% arrangement fee, covered by CBILS
• 0.5% exit fee, covered by CBILS if redeemed within 12 months
• Professional fees covered by CBILS
• 15-month term

Deal Summary

Our client was an experienced contractor and property developer who had owned a development site on the South Coast for some time.

The site already had an existing property. The client successfully obtained planning permission to demolish the building and construct four new townhouses.

The development will form part of an attractive gated community.

The client’s first-choice development finance lender initially placed the application on hold when the first lockdown began. However, because the client already owned the land, he did not face any immediate pressure to complete the purchase.

This ultimately created an opportunity.

Following the start of lockdown, several development finance lenders introduced CBILS-backed development financefacilities. These products helped support viable property development projects where an incoming lender had withdrawn or could no longer proceed because of funding concerns.

We sourced a suitable CBILS development finance facility for our client.

The facility included a Business Interruption Payment (BIP) that covered the first 12 months of interest. It also covered the lender’s fees, including the arrangement fee, valuation fee and Monitoring Surveyor costs.

The BIP would also cover the 0.5% exit fee if the loan was redeemed within the first 12 months.

The £1.3 million facility refinanced the existing debt secured against the site. It also provided funding for the full build costs, contingency, professional fees and Section 106 (s106) costs.

This effectively gave the client funding for 100% of the refinance costs and the remaining costs required to complete the development.

The structure provided strong support for the project while reducing the client’s initial finance costs during the crucial early stages of construction.

The Outcome

The CBILS-backed development finance facility allowed our client to move forward with the four-townhouse development despite the disruption caused by lockdown.

The developer is now on site and progressing the construction works.

For the first 12 months, the Business Interruption Payment covers the loan’s interest and eligible lender costs. This gives the developer greater certainty over the project’s finance costs while construction progresses.

This case demonstrates how specialist development finance can help experienced developers continue viable projects when traditional funding becomes unavailable or an existing lender withdraws.

If you are looking for development finance for a residential project, Positive Commercial Finance can help identify specialist funding solutions based on your development, experience and funding requirements.