Recently, we were approached by a business introducer who was trying to raise funds for an experienced Scottish property developer who, in turn, was struggling to find a competitive short-term finance deal so that he could realise a lucrative build development project.
The developer had already purchased the land and had also been given the green light in terms of planning permission, yet he found himself unable to obtain the additional (and not insignificant) funds needed to finance the building itself.
Owing to the vast scale of the project and the high loan-to-cost ratio, many bridging lenders were unwilling to consider the application, especially as an existing bridging loan, which was used to purchase the land, was nearing the redemption stage.
This meant that the developer faced the highly probabilistic reality of having to sell the land to a competitor in order to honour his existing financial commitments.
The initial request was for a finance package that was to be rolled out in three stages. However, we decided that it would be better to restructure the application so that every aspect of the development funding was combined into a single package.
In order to make the prospect more appealing to our exclusive panel of investors, our team devised a new application that focused on the number of off-plan flats that had already been sold, the level of interest shown by other prospective buyers, and the borrower’s high level of commitment and existing investment in the project.
We also took steps to show how the costs would reduce as the various stages of the build were completed.
Our efforts paid off, and within just two weeks, we managed to secure a loan amount of £6.21 million, which meant that the project could go ahead without any delay or further complications.
The investor we sourced for our client offered a revolving facility for the full £6.21 million amount, which was approximately 65% to 70% of the gross development value. This covered the full cost of the initial construction phase, which delivered 48 high-quality luxury flats within the first 10 months.
The interest charges and administrative fees were subsequently rolled up and added to the overall cost of the loan.
As the build progressed, the developer had the option of refinancing the original deal in order to take advantage of a cheaper rate once the first stage of development was complete.
Any finances owed to the lender are paid back by means of pre-sales and completed sales, and these funds are then made available to the borrower again in order to finance the end stages of the project.
“When most other bridging specialists were telling me my borrowing options were practically non-existent, UK Property Finance defied my negative expectations and found an appropriate funding solution that was fast, flexible, and realistically affordable. Although we still have another 8 months left before the project is complete, the end goal is now firmly in sight, and the remaining flats, many of which we have already sold, are almost finished.” – Our satisfied property developer client has asked to remain anonymous.
We are glad to report that both the lender and the client are extremely happy with the solution that we devised!
To find out more about our services as a provider of unique bridging loan solutions, please use the contact form provided on this website. Alternatively, speak to us directly on 0116 402 7982.