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

The return of Mezzanine finance for property developers

We know developers are finding that the banks have reduced senior debt levels to 50% to 55% of GDV thus requiring more cash from the developer. This increased cash requirement often means that a good scheme cannot be started. To help solve this problem we have made arrangements with half a dozen mezzanine finance providers (or "top up" lenders) who between them can cover a wide spectrum of developments and finance needs. Under the section OUR FUNDERS we show you how this might help you to prosper in 2010.

Our Funders

1 - £50,000 - £100,000 - These lenders prefer to put finance into projects at the outset but can also assist should cash become short during the course of a scheme e.g if the bank lender does not honour its original agreement to finance all the build costs. This does not mean that these lenders will lend on problem schemes and there must still be a very healthy profit in the development once it is completed. Sites in the south of England are preferred.

2 - £100,0000 - £500,000 - These mezzanine lenders prefer to finance developments from the outset. They will only lend on housing schemes and prefer to finance schemes in the south of England

3 - £500,000 - £3,000,000 - There is a good deal of flexibility where larger loans are needed. Some of our funders prefer family housing whereas others will put funding into high value single units in top quality locations across the country and will also consider lending on apartment schemes.

The common denominator for all the lenders is that the developer must have good experience and the scheme must have strong viability. Most of these lenders will need some cash contribution from the developer.
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We wish you a happy and relaxing time over the Christmas break and hope to work with you in 2010.

Best wishes,

Chris

CD Property Finance

http://www.cdpropertyfinance.com/