June's Property Finance Update

CASE STUDY – RESIDENTIAL INVESTMENT

A property investor and developer approached CD Property Finance for help with funding an unencumbered building consisting of three freehold flats.  The investor required funds for a further scheme but had not identified that acquisition at the time. Because of the uncertainty regarding the use of the funds and the fact that the flats were freehold there was limited interest from lenders but we were able to arrange a 57% LTV loan over 25 years at a 3.70% margin over base rate to enable the client to “hunt” for a new opportunity.

NEW JOINT VENTURE FINANCE

CD Property Finance has sourced a 100% finance scheme for residential development. The scheme must show a minimum profit on cost of 25% with a borrowing requirement of no more than £5m.  This scheme is for experienced builders and developers and is available throughout mainland UK.  Minimum loan £500k. 

This is an unrivalled opportunity for developers to kick start schemes that formerly required substantial developer cash input.

STRETCHED SENIOR DEBT

Definition – “Development Finance from a single lender comprising Senior Debt and Mezzanine Finance, which can provide up to 90% of project costs”. 

This is a valuable financing solution for developers with limited capital resources and is available for developments with a GDV from £500,000 to £100 million.  Lenders require returns on such loans of between 14% and 20% p.a depending on the risk profile.

NEXT MONTH

“Focus On The Capital” – Development Finance in London.

If you would like to discuss your property development lending requirements then please email us or call Chris on 01428 684452

Chris Dowdeswell e: chris@cdpropertyfinance.com t: 01428 684452/ 07788 591873

Property Development Finance - Market Update

Market Update - Spring 2013 The government's Funding for Lending Scheme now has over 30 participant lenders  This means that property investors can be cautiously optimistic about lower priced funding as it is our recent experience that for high quality investment deals some of these lenders are willing to apply the interest margin discounts which the scheme intended. Unfortunately, residential developers are unlikely to be looked upon favourably as all lenders perceive extra risk in this type of lending. However, there is some good news for developers. In recent months CD Property Finance has located no fewer than six good lenders that will provide "stretched senior debt". Essentially this provides developers with bank type development finance plus mezzanine, or top up, finance from a single lender.  All six of these lenders are active in the market and want deals from residential developers in the range of £500,000 to £25,000,000.  With these lenders willing to consider loans of up to 65% of GDV - in some cases 70% -  CD Property Finance is confident that this is a positive move and will increase confidence in the sector in 2013. If you would like to discuss your property development lending requirements then please email us or call Chris on 01428 684452

Chris Dowdeswell e: chris@cdpropertyfinance.com t: 01428 684452/ 07788 591873

Autumn Statement - Small Developers To Get Government Help

CD Property Finance will provide further details on this scheme when they become available. This is what is known so far.The Chancellor announced that where there are existing building sites that have stalled, a £400m Get Britain Building funding pot will enable small house builders to restart construction, helping to deliver up to 16,000 new homes on sites that already have planning permission, but have been shut down because of economic conditions.

The measure will be supported through the New Homes Bonus, which will ensure that those areas which are growing have the resources to meet the needs of their new residents and existing communities.It is intended that cash will be released by next July to get sites started.

If you would like to discuss this further then please contact Chris at CD Property Finance.

MARKET UPDATE

As we approach the middle of the year it is worth reflecting on whether the funding market has improved or whether it has stayed static like the general economy.

With base rate still at 0.50% and LIBOR at around 0.82% the borrowing costs for development projects remain relatively low. Depending on the Loan to Value (LTV) developers can borrow at rates from about 4.50%.

Admittedly, these rates apply to the lucky few that have considerable cash to input for a development deal. More typically CD Property Finance is arranging development funding at around 7% p.a for loans geared as high as 80% of cost. The lenders continue to charge significant fees, however, to boost their earnings on each deal.

For residential property investment loans the finest rate we are seeing for up to 55% LTV deals is around 4.00% p.a. However, LTV's of up to 75% are available for good residential investments. The commercial investment market is more challenging with maximum LTV's at around 65%.

New lenders have continued to emerge. Since the New Year two new authorised banks have been launched, both doing property lending as a major part of their business. Since January, CD Property Finance has had meetings with half a dozen new private funds who have money to lend either on a first or second charge basis for development projects.

To summarise, with the emergence of new lenders we would expect to find a lender for your project, provided the location is suitable and you can demonstrate the necessary expertise.

LENDER UPDATE

For short term borrowings we have a new lender that will provide finance for;

Bridging

Light Refurbishment

Heavy Refurbishment

The terms are amongst the most competitive in the market and can be summarised as:

2% arrangement fee, including broker fee

Interest rates from 0.75% per month for bridging loans and 0.90% per month for refurbishment loans

There is no exit fee and legal and valuation fees are low.

LTV range from 60% for heavy refurbishment projects to 75% for bridging finance

This product would suit:

Investors buying at auction and needing to carry out a basic refurbishment or conversion to the property

Developers acquiring larger properties which need major works. For more information please contact us.

Property Development Finance Update - May 2011

Earlier this year we advised you that the availability of property development finance had improved a little because of the entry into the market of some new lenders. This remains the case and in the section below we have shown some examples of deals that we have funded recently.

Portfolio investors have also benefited from the arrival of two new banks who can now provide loans for residential and mixed residential/commercial properties with good rental yields, up to 75% Loan to Value. This is a major improvement on a few months ago and can help those investors that wish to gear their portfolios so that they can take advantage of new opportunities.

CASE STUDIES:

Development Loan - £220,000 - single new build house in Hertfordshire. LTV 55% of GDV. Interest rate 7%.

Development Loan - £675,000 - single new build North London. LTV 50% of GDV. No formal valuation required by lender and fees were added to the loan.

Bridging Loan - £350,000 - auction purchase London. LTV 70%.

Portfolio Investment Loan - £300,000 - South Coast. LTV 55%

OTHER SERVICES

In addition to helping you with your property insurance requirements we shall shortly be able to introduce you to competitive terms for life cover and other protection products. Don't forget also to claim your capital allowances through us if you own commercial property.

For more information please contact us via chris@cdpropertyfinance.com or visit our website www.cdpropertyfinance.com

New Capital Allowance Claims Service from CD Property Finance

I would like to introduce a new professional service from CD Property Finance.

If you qualify, it could be worth tens or even hundreds of thousands of pounds to you or your company.

Unclaimed Capital Allowances

If you own certain types of property, you are entitled to claim substantial capital allowances to reduce your tax bill or, in many cases, receive a large tax refund - this would be an excellent boost to your cash flow. The only requirement is that the owner of the property should pay tax in the UK.

The types of property in question are:

1 - Commercial units in the UK with an original purchase price of £200,000 or more.

2 - UK and EEA Holiday Lets. There are some restrictions on these which we can explain to you.

HMRC does not publicise these allowances. Indeed, they will only accept submissions in a pre-approved format which comply with certain very strict rules. We work rigidly within those rules and our Principal Consultant alone has achieved almost 1,000 successful claims - with no failures!

How big is the opportunity?

It is estimated that less than 4% of valid claims have been submitted to date.

Find out free of charge

With the help of Portal Tax Claims Services you can find out free of charge whether you are entitled to any further capital allowances. There is a 96% chance you have a valid further claim. We operate a 'No Report, No Fee' service, so it will cost you nothing to find out.

Compliance

I am an agent of Portal Tax Claims who are part of the Portal Group, which includes FSA-licensed and regulated advisers. Because of its professional activities, compliance is of paramount importance meaning every claim we make for clients is comprehensively documented.

To find out how easily you could claim significant additional capital allowances, please phone me on 01428 684452 or email me at chris@cdpropertyfinance.com

Best wishes

Chris Dowdeswell

Property Development & Investment Funding Spring Market Report - March 2011

Nearly three months on from the start of the year and the banks have agreed to implement Project Merlin, the initiative to lend more to small businesses. It is hard to see how this will help beleaguered property developers, however. The major banks still have enormous numbers of problem property loans and it looks like another couple of years before they will show any appetite to lend to the smaller developer, most of whom require much higher gearing (Lending to Cost/GDV) than is on offer from the major banks. There are some new lenders that are making an impact and these are discussed below.

Investors are in a better situation. Portfolio finance is available from a number of good lenders provided there is strong interest cover. Typically up to 65% LTV can be sourced and there are lenders that offer interest only loans of up to 10 years.

New Lenders - Up to £500,000

Small developers carrying out schemes where the borrowing requirement is under £500,000 have suffered from a lack of interest from banks in recent years. This is slowly being addressed and CD Property Finance is helping developers with projects for new build houses, barn conversions and renovation projects.

Housing schemes preferred but flats considered

London and South East preferred

Arrangements fees from 2%, including CD Property Finance fee

Interest rates from 7% per annum

Exit fees likely to apply

New Lenders - Over £500,000

For schemes with a borrowing requirement of up to about £5m CD Property Finance can source finance from its usual lenders but also from new funders. The terms below will vary considerably depending on the developers' experience, the nature of the project and particularly the gearing.

Housing schemes preferred, but flats considered

London and South East preferred

Arrangement fees from 2%, including CD Property Finance fee

Interest rates from 4% over base rate

Exit fees likely to apply

Property Insurance

Don't forget to contact us if your renewal is due or if you have a new investment or development that needs to be insured. We can help even if the finance is not arranged through us!

If you would like more information please call or email us chris@cdpropertyfinance.com

Best wishes

Chris Dowdeswell
01428 684452

chris@cdpropertyfinance.com

www.cdpropertyfinance.com

Property Development Finanace UK Market Report - December 2010

As the end of 2010 approaches it is worth reflecting on the changes we have seen in the funding market this year. The answer is probably "very little"!

The high street banks have hardly any appetite for property lending, especially development finance for new borrowers. At CD Property Finance we continue to see cases where RBS/NatWest have terminated funding on schemes where all logic dictates that they should continue lending to maximise their chances of being repaid. Unfortunately, they are displaying little commonsense and this has resulted in many developers losing all the funds they put into the scheme. Meanwhile, the development is part built and blighted for the foreseeable future.

On a brighter note, we are working with a dozen or so active development lenders plus numerous bridging funders and a handful of good mezzanine funders. This gives a reasonable choice for developers, but it is still hard to satisfy lenders' strict criteria. The smaller lenders have been particularly supportive over the past 12 months. We even managed to secure funding for a small developer in a seaside town to create two flats on top of an existing apartment block, the funder providing a 50% LTV facility with rolled up interest.

Blended Senior Debt and Mezzanine Funding

Working with a single bank this is an attractive option for the experienced developer. The bank provides up to 55% LTV to GDV on normal bank debt terms with up to a further 10% of GDV attracting an enhanced return of typically 20% to 25% per annum. This type of deal is available for well located developments in areas where there is an excellent demand for the product. Typically, appraisals for such schemes need to show a return on total costs of 25% or more.

Finally …

In our blogs we try to provide practical advice to our clients. For instance, earlier this year we advised developers to think very carefully which law firm to instruct on their site purchases and funding of the scheme.
In recent months we have noticed that some developers are making direct contact with a number of lenders and instructing more than one broker in regard to their funding requirements for a particular deal. This is understandable in many ways especially with the internet at everyone's disposal. The developer naturally wants to feel he is getting the best deal.

However the market for development finance is small and there are relatively few experienced brokers and willing lenders. This means that it is more often than not counter productive to put the scheme to more than one source at a time since lenders take a dim view if they see the same deal from a number of different sources. They term it as "touting" or "punting" and invariably the fact that a number of parties are looking at the deal raises the suspicion that the proposal is a "difficult" one. From our experience when this happens that deal tends to go to the bottom of the pile, and stay there.

If you would like more information please call or email us chris@cdpropertyfinance.com

Best wishes

Chris Dowdeswell
01428 684452

chris@cdpropertyfinance.com

www.cdpropertyfinance.com

Bridging and Short Term Finance for Property Development

It will not have escaped the notice of developers and investors that there are still considerable difficulties with raising finance for property deals. The reasons are well known - the banks have neither the funds available to lend to the sector nor much desire to help.

However, in recent months it has become clear that there is a group of lenders with considerable financial resources which are available to help property developers and investors. These bridging lenders, or to use a better description, short term lenders are often backed by large funds using investor money and they are making a real impact on the market.

EXAMPLES OF USES FOR SHORT TERM FINANCE

Auction purchases - up to 70% of value.

Property acquisition where time is of the essence - up to 70% of value.

Refurbishments and conversions - on acquisition up to 70% is available.

Site acquisition - where you have a completed unsold site but are committed to buy another - finance of up to 70% can be secured on both properties.

Commercial and semi commercial purchases - up to 70% LTV.

2nd Charges - for completion of developments.


These are just a very few examples of how bridging and short term finance can help you.

Loans can be non status. Finance is available for up to 12 months and funds are made available very quickly.

We shall soon be enhancing our website with case studies and lending terms for bridging and short term finance so please look out for that but do call us if you wish to discuss how we can help you with this valuable source of funding.

Development Finance Lender Update

Arguably the most serious problem in the market at present is the depressed level of mortgage lending. There are few signs of this improving and, if anything, the shortage could get worse as the FSA considers imposing tighter rules on the lenders that could spell the end of interest only mortgages.

Notwithstanding this, we continue to seek out the best deals for our clients and to locate new funding sources. In this Blog we look at:

- Two new development lenders

- Development Finance in Scotland and the North of England

Bank Finance for Developers

This bank is keen to lend on viable schemes. An exciting feature is that they will allow the developer to "drip" in their contribution to the construction costs provided the bank is happy that future cash flows are likely to be generate sufficient income to fund the developer's share of the construction costs. This means they can in some circumstances lend up to 60% of land value. Their terms are:

• They lend to UK based co's, individuals and partnerships.

• Houses, flats, mixed use - England only.

• Minimum loan £500,000. Maximum loan £3,000,000.

• Interest rate - 8% p.a minimum - can be rolled up or serviced.

• Arrangement fee 1%,

• Exit fee 2% of loan.

• Loan To Cost- 60% of land; 60% of build.

New Small Development Lender

To add to our growing list of lenders we have sourced one that works on competitive terms based on a maximum loan of 55% to Gross Development Value. Terms are normally:

1% arrangement fee

Interest is currently around 7% to 7.50%

There is an exit fee of 1% to 1.50% of GDV

London and Home Counties only.

Development Finance in Scotland and the north of England

We are very aware that locating funding for development is probably harder here than in the south of England. However, amongst our lenders we have one that is happy to look at schemes for houses and flats in Scotland. They will lend up to £500,000 per development to a maximum of 60% of GDV.

Another lender will finance housing schemes for experienced developers in areas in the north of England where there is a strong demand to the value of £1,250,000 up to a maximum LTV of 70% (this LTV includes rolled up interest).

If you would like more information please call or email us chris@cdpropertyfinance.com

Development Finance Case Study 2010

West Sussex - £500,000 residential development finance for 4 new build houses through high street bank. Client had owned the land for some years. CD Property Finance arranged 100% finance to build the houses which should sell for £250,000 each.

Surrey - £150,000 loan to finance conversion and new build of 2 flats. Client had good construction experience but no development experience. The lender completed the loan quickly as work had started on site. The flats will sell for a total of £440,000. The lender required insurance for this project and CD Property Finance was able to introduce its insurance broker to the client, resulting in the insurances being in place in time for drawdown.

If you would like any more details or advice regarding property development finance, please contact us on chris@cdpropertyfinance.com
www.cdpropertyfinance.com.

DEVELOPMENT FINANCE MARKET REPORT

Following the long break we have plenty of news to share with you...

If we are to believe the media and some commentators, the coming months are going to prove difficult for the residential property market. A lack of mortgage availability is still a serious stumbling block despite continuing low interest rates. Another cloud on the horizon for both developers and house buyers is the new rules governing banks' capital requirements. The greater amount of capital the banks have to hold, the less they can lend. This could be another blow to developers and property entrepreneurs who are already being squeezed by the banks.

SPECIALIST LENDERS

The private, non bank lenders are largely unaffected by capital requirements and they have stepped in to the shoes of the high street banks who have virtually stopped lending to small property developers. These specialist lenders have a far greater understanding of development than the average bank. For this reason alone they can be recommended. They also have quick decision making processes which is refreshing given the months that many deals now take to complete through the big banks. Interest rates typically start at 1% per month and most funders are willing to lend up to 50% of Gross Development Value.

One small bank has made a promising debut, lending to SME developers. Of particular benefit is that they allow the developer to provide their contribution to building costs "on the drip". They lend 60% of land and 60% of building costs provided you can show that you have future cash flows that will be sufficient to make your 40% contribution to the building costs. The effect of this is to give you a higher LTV on the land loan.

We have a number of such lenders through whom we can source development finance, and we would be pleased to introduce your scheme to them.

SOLICITORS

It is tough enough to achieve a development finance loan offer these days but the pain can be further exacerbated by long delays in completing development loans. At CD Property Finance we have experienced this on a number of occasions. A period of 6 months to complete a loan is unusual but not unheard of.

One of the main causes of delay can be the lack of experience of the borrower's solicitor. It is imperative that any serious developer should instruct a lawyer who has considerable experience of the complexities of development funding. For this reason, unless your solicitor is highly competent in all aspects of property transactions we recommend that you seek the advice of CD Property Finance on who should act for you. We may well suggest using one of the lending bank's panel solicitors since they will be fully conversant with the lender's requirements. We can assure you that this will go a long way to avoid you losing the development opportunity and can in the long run save on legal costs.

Please feel free to discuss this with us.

PROPERTY INSURANCE, INCLUDING CONTRACTORS' ALL RISKS COVER

All property lenders insist on Contractors' All Risks cover for your project in addition to your compulsory insurances If you do not already have adequate insurance then, again, this can be the cause of long delays in loan completions.

CD Property Finance is happy to help you with all your general insurance requirements through our close relationship with one of the country's leading insurance brokers. Our experience is that they provide an excellent service and can place the most difficult risks, for example, where a project has already been started but no insurance is held.

LTD COMPANY BUY TO LET

We can arrange Ltd Company Buy to Let finance for both houses and flats. Maximum LTV is 75% for houses and 50% for flats. Rates start at 4.24% per annum.

Please contact us for more details.

Email: Chris@cdpropertyfinance.com

web: www.cdpropertyfiance.com

Summer Property Development Finance Update

It's been a busy time in the property finance world in the past few weeks, but there is a distinct imbalance in the market. Prime commercial and residential property are still selling well and funding is available for investments and for development in these areas. However, the secondary market in both sectors is struggling because of a lack of lenders willing to finance any property project carrying what they perceive to be undue risk. In the case of commercial property this may be because the property is let on short leases or where there are break clauses. For residential, there could be a multitude of reasons ranging from location to property type. Flats/apartments are still not popular even with the most active lenders.

As you will see below, we are finding that RBS Group is shying away from any new property projects presented to them for clients new to the bank and is reluctant to help existing borrowers. However, other banks are beginning to step in, cautiously.

I am also pleased to announce our tie up with one of Europe's largest independent commercial insurance brokers. They have the resources to help you make considerable savings on your property and related insurances.

DEVELOPMENT FUNDING

As you may know, CD Property Finance specialises in arranging residential development finance for its clients. Many of you will have facilities with the RBS Group and may be finding that they are reluctant to lend. RBS have generally been very supportive of developers in the past and we have an excellent relationship with the bank but unfortunately they now have to reduce their substantial property loan book. This means that they are very unlikely to take on new clients. For existing clients the picture is not good either and we are already seeing many enquiries from good borrowers who are being told by the bank that they must either reduce or repay borrowings.

We are here to help you. We have long established relationships with all the key lenders and direct lines into their property finance teams. This enables us to solve clients' funding problems. We do not pretend that development finance is freely available but if your scheme meets certain criteria we can probably help. Remember, housing is favoured and the bank will always want to provide enough finance to cover 100% of construction costs and interest. This often means that little can be advanced to buy the land so please bear this in mind.

If you have a project and it needs financing please do contact us.

GENERAL INSURANCE

Our new partner can arrange insurances for

Property Developers - Contractors' All Risks cover; buildings cover; liability insurance

Property owners and investors - Buildings cover; liability insurance.

Here is one example of a current offer:

Our insurance partner is offering great terms to SMEs that meet standard underwriting criteria and have been in business for 3 years or more and have had no claims for 3 years.

For businesses that meet these criteria, and are eligible for their Retailers & Office Policies they will give you a quote of 5% less than your current insurer’s premium.

We will soon have offers for discounted insurance for property developers and will advise you immediately of them. However, if your renewal is due shortly let us know and we will arrange for a quote.