Development exit loan for client building 3 bespoke properties

What was the situation?

My developer client had been involved in a project which comprised the build of three large houses in Hertfordshire. They were at the end of their existing term with their development finance lender, and wanted a 12 month development exit facility to provide a buffer period to sell two of the three houses, leaving the last one for them to move into once complete.

The development was a collection of unique and exclusive modern houses of exceptional build quality and environmental credentials.

What was the issue?

The challenge we were facing was that the development contained three large bespoke units. This not only made them difficult to value, but there were concerns over the number of individuals that could afford them in the area; namely whether demand in this market was high enough to ensure that 2 units would be sold within 12 months.

Also, as the client intended on living in one of the units, the deal was regulated which limited the number of lending options available to us.

What was the process?

To find a solution, we researched the whole of market to find a lender who was familiar with the location and had the ability to assess each unit individually, providing a total loan of £6 million.

We organised multiple calls between all parties involved in the transaction to ensure the loan being offered was at a level sufficient to meet the client’s requirements, whilst also helping the lender to feel comfortable enough with the security to proceed.

During the lender discussions, we took responsibility of managing the legals to ensure the funding had been finalised in good time, so once approved we could complete on the loan in two days.

What was the solution?

Our hard work paid off as we were able to secure the full loan amount required by the client. After the lender visited the site twice to check on the completion of the works, they agreed that the work was being carried out to a high standard and provided the final draw down of funds ahead of the site being completely finished before going on the market.

The client was delighted to receive the full exit facility, meaning that they could have the additional 12 month buffer period to sell the properties. They were confident that it was enough time to maximise the marketing needed for sale.

The process was stressful in that the existing development finance facility had already expired, but through open communication and additional support from LDN Finance, we managed to keep the exiting lender informed and comfortable that they would be redeemed whilst we went through the process of the re-finance.

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