Land loan for cashflow release, followed by a Property Development Finance Loan for five new-build houses

Deal Structure

Land loan – 50% LTV

Development loan – 65% of GDV

Interest rate – 1.25% per month

Arrangement fee – 2%

Exit fee – 1%

12 months term

Deal Summary

Our client is a ‘first time’ developer who owned a site, unencumbered, with planning consent for 5 houses.

The client had an urgent cashflow need in another of their businesses and urgently wanted to borrow some money against the land value. The plan was then to obtain a planning uplift for larger properties and develop out.

The risk issues for the lender were:

1. The client had no ground investigation reports whatsoever, and the request was for the lender to make the land loan in advance of these being available.
2. First-time developer.
3. The client did not want to bring in a main contractor on a fixed price JCT contract for the build out – instead preferring to use the services of a project manager they already had a relationship with, to manage the scheme.

We therefore needed a Property Development Finance lender that could be extremely flexible in their approach to the deal.

Such a lender was sourced and a commercial view was taken on the ‘risk’ issues mentioned above,  allowing a fast drawdown against the land value and a development facility went in place once the ground investigation reports were available and the planning uplift was obtained.