Gerard Morgan Jackson, Head of Structured Finance
Whilst there are several development lenders in the market to choose from, most tend to specialise in one or two areas. This can often mean that clients have to refinance their schemes with different lenders as they move through the various stages of a development and beyond.
For example; acquisition, planning assembly, development, sales period and/or investment. Each change of facility can trigger additional costs including solicitor and valuation fees and these can take a substantial bite out of the developer’s margin. But perhaps more importantly, and especially in the current uncertain economic environment, there can be a lack of certainty when it comes to agreeing a new facility with a new lender. The relationship built up with the lender during a previous stage of the project counts for nothing if the developer then has to seek out a new funder to accommodate their next step.
Adaptable funding
Once a client has established a strong relationship with UTB, we are able to move with the client, adapting as the scenario and the client’s needs change. Being a specialist property lender, UTB provides flexible funding solutions. If necessary we can support a developer or house builder with Structured Finance, development finance and bridging finance with the three divisions working closely together to provide the most suitable solution.
With the case examined below, the client would typically have had to take a sales period loan, and with it pressures to achieve sales by certain deadlines, or an investment loan to retain the flats which would require specific income levels and exit fees if the client elects to sell any of the units. In a market which is susceptible to rapid change, we structured a facility to allow the client to do both and thereby provided both flexibility and certainty whilst keeping their additional project costs to a minimum.
| Borrower | • Developer/Private Client |
| Amount Loan Type |
• £12.8m • Refinance part completed development onto a medium term facility |
| Location | • Central London/ South East |
| LTV | • 63.5% |
| Project type | • Security package including 13 flats, commercial premises and a property in a prime location in the South East |
| Special Features | • Flexible loan structure |
Flexibility keeps the customer in control
In 2017 United Trust Bank refinanced the completion of a development of thirteen flats in North London and offered a nine-month sales period facility in order for the borrower to sell the units and repay the borrowing. The facility was secured by the development and a security package comprising residential and commercial properties in the South East held in third party vehicles.
The development reached practical completion in early 2018 and whilst some initial sales were achieved, the clients felt that they could maximise profits by holding some of the units and selling these over a period of time. We were therefore approached to restructure the facility and we agreed a three year term loan which offered the borrower the flexibility to sell or rent individual flats subject to covenants during the term of the loan.
Repayment could be achieved through a combination of sales or refinance with this structure offering the borrower flexibility during the course of the facility and giving them the opportunity to maximise their return on the completed development.