£2.4 million Development Loan: Funding for a large scale new buildPublished on 3rd October 2019 2019-10-03T07:13:42+00:00
The growing numbers of young people in further education means that student accommodation can provide a major business opportunity in many parts of the country. In many university towns, demand already exceeds supply - and with opportunities for the traditional approach of conversions now drying up, many developers are looking at building purpose-built student accommodation.
At Rangewell, we recently helped a developer based in the Midlands find £2.4million to build a major student property scheme.
A developer based in a city in the Midlands with a major academic presence saw the possibilities of a brownfield site close to the university for student accommodation. His business acquired it for £800,000 with a Bridging Loan.
They called in an architect who drew up a scheme to create a campus-style development, offering accommodation for around 150 students and making a major contribution to the local accommodation shortfall. They then approached the local authority and the university. Both were enthusiastic about the scheme, and the local authority granted full planning permission for three tower blocks, each providing 50 flats with common rooms and other facilities.
The developer looked at the build costs with his architect and approached Rangewell to secure the necessary funding.
The developer needed to borrow £2 million to cover the build costs.
But they had an additional need. They had bought the site with a Bridging Loan, and had planned to pay it off with the profits from another project. That project had not gone to plan, leaving them with a £400,000 shortfall.
“We knew that we had secured a site that was a potential moneymaker - but with the Bridging Loan we had in place, every day was costing us money. We could not afford to delay - we needed to find a better way to cover our existing costs fast.”
They needed a solution which would pay off their high-cost Bridging Finance as well as to fund the construction work.
With a detailed and costed schedule of work and the support of the local authority, we were confident that we could provide all the funding our client required with a Development Loan.
About Development Loans
Property Development Loans are a type of short-term lending designed to deliver funding for property development projects, ranging from funding for light refurbishment to ground up development, starting with an empty plot of land.
They are suitable for experienced developers with a record of successful projects. Basic loan terms are flexible from 1 – 12 months, and arrangements with no monthly interest payments may be available.
‘Ground up’ loans can be made available for large-scale projects, with costs of £1-3million common. These may offer longer terms to cope with the timescales of major builds.
How we helped
We found the most competitive source of finance from a major lender. They were able to offer market-leading rates and very fast underwriting, with indicative terms in just 24 hours.
This was ‘ground up’ funding, which would pay for all construction work on the site, and pay off a proportion of the Bridging Loan which had been used to buy the plot - the rest to be dealt with from the developers own resources.
Not only could it offer the funds required, the lender was able to offer a variety of Exit Finance options which would provide solutions if the project hit snags or did not go to schedule for any reason.
We were able to secure £2,400,000 at 0.5% per month which allowed the developer to pay off his Bridging Loan and start work on the project.
The developer has already broken ground, with completion scheduled for the beginning of the 2020 academic year.
Are you ready for a large scale property development? We help people with business ideas find financial solutions to put those plans to work. Loans, Asset Finance, Commercial Mortgages or any other kind of finance - our expert teams find the most appropriate funding solutions while our network of lender contacts and our unique online tool let us find the most cost-effective rates.
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