Mortgages for Business raises £934k to build 8 flats next to railway

Mortgages for Business raises £934k to build 8 flats next to railway

Despite most lenders’ concerns with funding a development in such close proximity to a railway line, Mortgages for Business was able to raise the required finance for an experienced developer….

The client: A businessman with a successful property development portfolio. Also the owner of three wine bars in London.

Property development experience: The client has more than 10 years’ experience of new build residential property development with the majority of projects being constructed in the London area.
The project: A ground-up development of eight flats in the North London borough of Haringey.
The challenge: To find a lender willing to finance the development – the site is small, located right next to the railway and although none was found on the site, Japanese Knotweed was identified nearby.
Land purchase price: £600,000
Build costs: £650,000
GDV: £1,750,000
Loan amount: £934,000
LTV: 53 per cent of GDV
Estimated completion date: Summer 2015
Mortgages for Business was approached by a broker who was looking to secure finance for his client to build a block of flats on a small, undeveloped site next to a railway in North London.

The client had purchased the land with his father in 2011, when the availability of property development finance was limited. They successfully sought planning permission to build a block of eight flats then waited for the market to pick up. By the time finance was more widely available, the father had retired from property development, so he transferred the balance of his interest in the land to his son by Deed of Gift.  

The broker who approached Mortgages for Business felt that he did not have the experience to source the most appropriate lender nor negotiate terms, so he asked Mortgages for Business for help. It knew that the proximity of the railway and the potential threat of Japanese knotweed was going to be sticking point for most lenders, so it decided to approach Aldermore Bank.

Because the site was close to good transport links, in a popular residential area, and because the developer could demonstrate comprehensive previous experience, Aldermore agreed to finance the project.

Commenting on the deal, David Whittaker, Managing Director of Mortgages for Business said:

“The main challenge for us was to find a lender willing to finance a site deemed high risk. Fortunately, the client could provide evidence of his extensive experience in similar property development projects and was willing to appoint a contractor that had been vetted and approved by the lender. We were able to negotiate terms acceptable to both lender and borrower.”

An 18-month loan facility has been agreed, which will be drawn down in stages subject to sign-off by the quantity surveyor.

Construction is now underway and the flats are due for completion in the summer of 2015. Once complete, the client’s exit strategy is to sell off the flats on separate leases, targeting young professionals.


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