John Waddicker: Stretched senior debt at low rates

John Waddicker: Stretched senior debt at low rates



Our existing developer client had recently concluded and sold a development of four townhouses in Berkshire, and had agreed to buy his next site in neighbouring Surrey .

Our existing developer client had recently concluded and sold a development of four townhouses in Berkshire, and had agreed to buy his next site in neighbouring Surrey. The new site came with detailed planning consent for the demolition of an existing building to be replaced by three dwellings which included two detached five-bedroom houses and one detached four-bedroom house.

The purchase price for the site was agreed at £730,000 with total project costs at £1.65m. The developer had £250,000 to contribute towards the purchase, so a facility of £1.4m plus interest and fees was required for up to 12 months. The gross development (GDV) value was proposed to be £2.1m.

A development facility was agreed which provided £480,000 (net) towards the acquisition which equated to 66% loan-to- value on Day One, then 100% of build costs to give a total net facility of just over £1.4m, which represented 85% of project costs. Interest was allowed to roll-up on top of the £1.4m facility with the lender’s arrangement fee also included.

What also made the deal very attractive to the developer, who was also acting as main contractor, was that the lender also agreed to another advance prior to any works having been carried out, to kick-start the build. This took the initial advances to considerably above that available in the rest of the marketplace.

Being extremely competitively priced, the facility came with a 2% arrangement fee, interest at 8% per annum and no exit fees, which was a great deal given the specifics:

66% net on Day One (plus interest roll-up and arrangement fee added)

85% of project costs

67% loan to GDV

Attributed to John Waddicker, Director, Positive Commercial Finance 


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