Despite the tight timescale, Mortgages for Business found a lender willing to provide funds to a newly formed SPV Ltd Co to buy and develop an entire site.

The clients: Four directors of a Special Purpose Vehicle (SPV) limited company formed in November 2014 especially for the project. The SPV has £1.7 million to invest.

Property development experience: All four directors are experienced developers and investors in their own right. They have also worked together previously developing similar properties in West London.

The project: Purchase of a commercial office block in Richmond-upon-Thames with planning permission to convert into ten residential apartments. Originally the offices had been owned by a bank and operated as a business centre but this had proved unprofitable so they sold the premises without planning permission to developers. The property is close to the station. Architecturally it is well suited to conversion into apartments and has plenty of parking space.

The challenge: To find a lender that was willing to provide funds within a six week timescale to facilitate the purchase and subsequent development.

Property purchase price: £3.7 million
Build costs: £1.3 million
GDV: £6.03 million
Funds provided by SPV: £1.7 million
Loan facility: £3.3 million
LTV: 55 per cent of GDV
Loan completion: December 2014

The funds were needed quickly because a six-week timescale was a stipulation of sale by the vendors who needed finance for another project. (The vendors had purchased the building without planning permission, which they subsequently got. This increased the property’s value enough for them to make a £500,000 profit without having to develop it themselves).

The developers agreed a price of £3.7 million for the building. They could fund £1.7 million themselves but required a further £3.3 million for the purchase and subsequent development works. Mortgages for Business approached a lender that not only works to tight timescales but is also happy to lend based on a percentage of the project’s Gross Development Value.

Commenting on the deal, Managing Director, David Whittaker, said: “We negotiated a fixed rate 18-month loan facility which will be drawn down in three stages subject to sign-off by the quantity surveyor.  To ensure that the application was processed without a hitch, we compiled and submitted a comprehensive proposal for the developers in support of their application. Much of our success was down to the way in which the application was presented; we focused on the format the lender prefers which included a full breakdown of costs, architect’s drawings and examples of previous projects which emphasised the developers’ expertise.”

Funds to complete the purchase and start work were released a week before Christmas and the conversion is now on track to finish before the end of 2015. Once completed, the directors intend to refinance the property onto a longer term product and offer the apartments to executives of global companies who require accommodation on a short term basis.