Development Finance Solutions
One of the fastest growing areas of funding, development finance can often appear complex. Developments can range from land purchases and ground upbuilds, through to heavy and light refurbishments and mezzanine loans.
Our team has experience working with both residential and commercial property developers to structure the best possible funding solutions for their projects. Regardless of size or location, we can assist and have previously been involved in transactions at varying degrees of complexities, from single unit conversions, right through to major multi-unit developments.
Typically development finance facilities will advance between 65% and 80% of the cost of a development. This is arranged through a senior debt facility (ie the core borrowing for a project) and secured by a first charge on the development. However developers may not have the equity required for or wish to spread their cash among numerous projects. In this instance we can look to arrange a facility up to 80% of GDV or a net loan of 90% of costs by blending in a top up mezzanine loan facility.
Mezzanine loan finance provides a top up layer of financing, sitting above the senior debt provider but under the developer’s equity. Typically this funding us secured by a second charge and allows for the loan to cost to be increased for debt funding up to 90% net loan to cost of the development or even 95% with new ‘super’ mez facilities. Mezzanine loans can be provided from an additional debt provider and the money will usually be used at the outset to minimise the developer’s initial contribution towards the purchase.
Equity Finance or Joint Venture Finance provides experienced house builders and developers with up to 100% loan to cost. Investment partners will typically invest their money through shares in a specially created corporate vehicle (SPV) or, more commonly, through a profit share agreement. We have access to a number of High Net Worth individuals, family offices and private equity firms who are keen to lend their money to experienced developers.
- Development Finance can lend against the Gross Development Value (GDV) and the total project costs.
- Borrowers can spread their capital further, minimise their risk and maximise their returns by leveraging the project.
- Leverage is available through Senior, Stretch Senior, Mezzanine and/or Equity/Joint Venture Investment.
- Facilities are available for experienced and non-experienced developers who are building within the UK.
- Funding is available to all developers regardless of experience.
- Lending facilities can be structured to leverage the project to minimise the developers contribution.
- Interest rates are simple, non compounding which dramatically decreases the overall cost.
- Loan facilities are available from £500k to £100m.
- Terms can be between 3 months and 36 months.
- Loans are available for a multitude of developments.
How Oakmead Finance can help
Oakmead Finance is a trusted specialist in property development finance having helped source and arrange development finance facilities from £250k to £94m. We have experience in arranging and structuring development finance facilities up to 90% loan to costs including senior debt, mezzanine loans, bridging loan finance and equity finance for our clients. Contact us to discuss your requirements and explore the options available to you.
We were approached by a property developer. He already owned a large piece of land in the south west through his developing company and had planning permission for 15 units, worth around £800,000. He wished to buy the adjoining piece of land to add an additional 6 units to the development. To do this, he needed to borrow £450,000.
He also owned another local development nearing completion. This was currently worth around £1.5 million and had a small loan of £240,000 secured on it.
We met with the client to fully understand his background, his experience and his plans, so that we could build a comprehensive proposal with integrated financial and cashflow projections for the prospective lender.
As we keep up to date with the market, the following day we met with a private bank, who we knew was a new entry into the development finance market.
By using both the proposed development and also the existing developments as security, and using cash projections from the development which was nearing completion as evidence, we were able to show that our client would have cash available to service the debt. Because of this, were able to get the lender to agree to the full £450,000 needed.
As a new entrant to this lending market, we were able to negotiate terms that were significantly better than other existing lenders. The bank agreed the facility at a cost of 1 per cent per month for a maximum of 12 months. This was around 40 basis points cheaper than other options, saving our client around £1,800 per month in interest costs.
The £450,000 loan allowed our client to buy the additional piece of land and increase his company’s pipeline of properties. By dealing to us, he was able to save over £20,000 compared to the quotes he had received from rival lenders.
“I have been absolutely thrilled with Oakmead Finance. They worked on this with a professionalism and a spirit that has been magnificent — consistently, at every stage of every twist and turn. I am genuinely in your debt, and hope over time to be able to give back a tiny bit of all I received from you.”
Oakmead Finance Ltd is a company registered in England and Wales. Registered office: Lynwood House, Crofton Road, Orpington, BR6 8QE. Registered number: 09478864.
Development Finance facilities are not regulated by the Financial Conduct Authority.