Location : Pinner, Middlesex

Loan Type : Bridging; Development Finance

Loan Size : £8.4m

Loan to Value : 70%

The Situation

Our client was looking to purchase a retail unit with office uppers that had a stub lease and qualified for permitted development rights. The clients plan was to hold the asset during the lease run-off (just over 2 years) and then attempt to revise the planning to add additional development space during that period, and then sell site or build out the development themselves. Such projects are referred to as Transitional Assets, and most lenders do not like them.

The Challenge

The client required relatively high gearing, and also the comfort that the lender could accommodate the transition to development finance if needed. The lender needed comfort around the anticipated build costs for the development, and the projected GDV of the scheme. As a broker, our job is then to satisfy the lender that there are alternate funding options based on those numbers (in case the lender decides they do not want to fund  the development stage of the project). There is a lot of work that goes into such financing and we need to involve multiple third parties to evidence all of this.

The Outcome

We secured a loan of 70% LTV against a purchase price of £ 12m. The lender committed in principle to funding 100% of the budgeted build costs at a later stage, subject to satisfactory QS reports and valuations at that time. By using a lender that could do both bridging and development finance, the client was more confident of the lender’s ability to follow through to the development funding stage. The lender too, was more confident in the scheme due to their better understanding of the background to the asset before development finance was requested.