United Trust Bank (UTB) has launched two new development finance products.
The first is a ‘build-to-let’ solution intended to provide a one stop funding service for developers operating in the private rented sector.
The facility will provide funds to complete projects and give an agreement in principle to provide an investment facility at the end of the build which will reduce the funding costs and recover some equity, allowing the developer to move onto the next project with UTB.
Noel Meredith, Executive Director of United Trust Bank, said: “Developers on multi-unit projects sometimes decide to retain a small number of the units to create or add to their own buy to let portfolios and retaining one or two of the last units as deferred profit can be a cost effective option.”
“However, more recently we’ve seen some developers taking this approach to the next level and creating entire ‘build-to-let’ projects where they are literally building their own rental property portfolio at a much lower cost than acquiring existing housing stock.
“They not only get a property portfolio at wholesale prices, but they avoid all of the other associated costs one encounters when buying properties through traditional channels, including valuation and legal fees, and they have just one financial solution for the whole of that group of properties rather than a number of different loans or mortgages arranged if properties are acquired piecemeal.”
The second product is UTB’s Sales Period Funding solution, which will allow developers to refinance remaining stock from completed developments while they are selling the project.
In most cases, the bank will prepare to refinance existing debt and self-funded development costs, with an element of equity release potentially available.
Noel added: “Our Sales Period Funding solution will help developers in a variety of circumstances.
“Developers who wish to give themselves more time in which to achieve sales but have an expensive senior debt or a restrictive term may wish to refinance with us in order to reduce their ongoing costs and maximize their unit sales values.
“Our facility may also enable them to release capital in order to progress other projects. We will be happy to discuss refinancing opportunities with developers who have completed or near completed sites.”
New Product Overview
Build-to-let – Part 1 – Development
Traditional development loan up to 60% of GDV
100% of construction costs, fees and interest and a contribution to site purchase.
Terms of up to 24 months
Agreement in principle that upon practical completion and achieving a level of ASTs the loan may convert to an investment loan.
Build-to-let – Part 2 – Investment
Investment loan up to 65% of value upon completion
Terms of up to fiver years
No fees on transfer to investment loan other than for new money and valuation
Sales Period Funding
For experienced developers who are close to achieving build completion
Loan amounts up to £10m
Up to 70% of CTV
Terms of 6-9 months usually. Occasionally up to 12 months.
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