Sourcing a senior bridge and 2nd charge for experienced developer

Sourcing a senior bridge and 2nd charge for experienced developer

Article by Chris Oatway Co-Chief Executive Officer

What was the situation?

Our client, an experienced developer, approached us after experiencing delays through the construction period of their project due to a troublesome contractor. They were looking for finance to provide additional time to pay back their existing development finance lender, then go on to sell the units once completed at maximum value.

Located in Crawley, the enquiry was for a 9 unit development with 2 units sold and 7 units remaining. The developer needed 80% LTV on the borrowing to pay back their existing lender.

What was the issue?

The first obstacle to overcome was minor planning conditions that were not signed off due to the Council having major structural and service challenges.

This was frustrating for the client because they wanted to work with speed and use the same valuer that had previously acted for the existing development finance lender.

The plan was for the client to release equity from the sales of the units to repay the equity they had tied up in the project, but they required a very high leverage at 80% LTV which is further than most lenders will go to.

What was the process?

By providing a clear presentation with all the various nuances within the requirement being stated up front, it meant we could tackle the finance requirement head on with the lender.

Due to the leverage required, we had to combine a senior debt bridging lender and a 2nd charge investor to hit the high levels of funding required. The key thing to look out for was having a second charge investor who already had a Deed of Priority set up with a first charge bridging lender for speed and reduced cost.

Through previous success of this finance structure during the covid period when lenders were decreasing their risk by dropping their LTVs, I applied this experience to my approach to the new deal which had similar LTV challenges.

The key to finding a solution for this application was understanding which senior debt bridging lenders were well placed to work with a 2nd charge lender, and be proactive in getting the deal across the line. Having a supportive, flexible and highly communicative lender was absolutely critical.

We set our expectations high with both lenders and laid out exactly what we wanted to achieve for the client, maintaining complete focus with all the parties involved. The team at LDN Finance worked closely with the business development manager, underwriter and director at the lender in the most transparent way possible to truly work as a team to reach the end goals of the client.

What was the solution?

We managed to get the leverage required and the flexibility built within the deal to release the equity from the sales, in addition to getting the lender to agree to add a specific valuer to their panel to make the deal happen.

Due to the high leverage the rate and fees were critical to the success of the transaction. Through lengthy negotiations, hard work and being flexible in backloading fees we managed to tick every box within the finance that was needed to make it happen.

By securing this facility, it gave the client the breathing space they needed from the existing lender who was becoming increasingly demanding for their loan to be paid back due to the delays.

Although it was a challenging deal, the key thing was the high levels of communication, support and drive to make the deal happen. The client was never in doubt over the level of commitment LDN Finance put in to make sure the development exit bridge with the 2nd charge investor was a success.

Lending solutions with LDN Finance

Are you purchase property in need of renovation, but have a complex application that you would like some advice about? We’re here to help you find a solution – no matter how complex your circumstances. At LDN Finance, our expert brokers have extensive experience in providing creative solutions to secure large loans for our clients.

We work closely with our trusted network of private banks and both high street and specialist lenders to arrange bespoke mortgage arrangements to suit your circumstances at competitive, market-leading rates. 

Get in touch with us to organise an initial consultation.

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Our happy clients

We used LDN to arrange our mortgage as first time buyers. Drew has been excellent at every step. Rob handled our life insurance and again, the service was outstanding. Rachel made regular check-ins and provided progress updates. An exceptional all round performance.

Mr. D

August 2021

Excellent and outstanding professional service from start to finish. From offering as many options as possible, to explaining to me very quickly what the benefits are and what I should really be thinking about moving forward. Thoroughly recommend.

Mr. M

July 2021

LDN Finance were on the ball, helpful, supportive and nice to deal with. They were brilliant at back channelling with both lender and lawyers. We had tricky development and bridging finance and a short time frame. I would recommend them.

Mr. H

April 2021

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