- Land value – £600,000
- Loan amount – £1,450,000
- Gross Development Value £2,500,000
- First time developer
- Remote location
- Holiday Let remortgage as the exit strategy
What was the situation?
The client had acquired an old farmhouse and obtained planning permission of a large holiday let development in Cornwall.
They had no prior development experience and were struggling to raise development finance for the 12 month build project as a result.
What is the issue?
Althought the fundamentals looked good and the land had no existing debt, lenders were nervous about the high value of the end product, the location and the lack of development track record.
The Loan to Gross Development Value (GDV) was sensible at 58%
- Due to the global pandemic demand for domestic tourism has skyrocketed, fundamentally validating the end use of the building
- The client had been able to secure planning permission on the unencumbered land, which ensured that the lender had plenty of day one security
We identified a local lender that had an intimate knowledge of the area. They understood the project funamentals and believed in the demand for the holiday let as the end product.
We made enquiries with lenders that would have an appetite for refinancing the building on a holiday let mortgage at the end of the build and presented this to the development lender as reassurance their loan could be repaid in this way.
We negotiated an 18 month term loan to allow the client sufficient time to build out the house and provide 6 months for the refinancing to a holiday let mortgage.
Do you have a development that needs financing?