A glimpse inside our return to development finance
Marcus Dussard (pictured) sales director at Castle Trust
It’s fair to say that it’s a difficult environment for developers at the moment as political and economic uncertainty are impacting on both the property market and the provision of affordable, reliable finance.
But there continues to be huge opportunities for developers to meet the increasing demand for housing through the provision of new schemes and conversions, and we believe that this a market that is set for long-term growth.
This is why we recently relaunched our development finance proposition, which is available to individuals, SPVs and limited companies that require up to 70% gross development value (GDV) on day one, with loan sizes available from £1m to £10m.
On every development finance case we will ask three simple questions. Has the developer completed at least two similar schemes in the past? Does the developer have cash in the deal? And is buy-to-let a realistic exit for the development? If the answer to all three of these is yes, then we are keen to develop the conversation. But what might these cases look like?
Here are two examples of live cases where we have helped developers to fund their schemes which demonstrate the types of projects we are now working on.
The client was a very experienced developer who had recently completed the development of a 106-unit apartment scheme in Leeds. They had since secured planning permission for the demolition and rebuilding of a Working Men’s Club in Meanwood, a suburb four miles from Leeds city centre, for the construction of 54 new luxury one- and two-bedroom apartments.
As the client had a strong development background, we were able to advance a £6m loan, based on a GDV of £9m over a term of 18 months. The build remains on track for completion later this year and is expected to be delivered at the same high standard that the client has achieved on previous schemes.
We worked with a developer to provide a facility for the refinancing of a development site in Plymouth, which included the demolition of a vacant 40-bedroom council care home facility and the subsequent construction of a seven storey 76-unit apartment building.
This was a large project, with a GDV of £16m and a required loan size of £12m, but as the client was an established developer with a proven track record in construction and property development, we were able to provide the senior debt on a 24-month term, applying a pragmatic approach which has helped to propel this project forward.
The build continues to progress very well, has been featured in the local press, and the sales office is due to open shortly.