This next scheme in Leeds involves the development of an ex-office building and will produce 153 high spec apartments, predominantly aimed at young professionals. The local market is desperately short of rental stock, and so both investors and owner occupiers have shown an encouraging degree of interest.
We recently agreed a facility for our developer client who regularly handles large schemes of city centre apartments in the North of England.
Just under two thirds of the units have been pre-sold to UK-based investors, with the balance to be sold on the open market. The buyers of the pre-sold units have paid a significant deposit, sufficient enough to give the funder the comfort that these were “reliable” sales, from committed buyers.
There is an element of ground floor commercial space, for which the developer is currently in discussion with a number of prospective tenants, and heads of terms are expected imminently. The residential parts alone were sufficient enough for the lender to fund against, and as such, pre-lets on the commercial part were not required prior to completion of the loan.
A £15m facility was agreed against a gross development value of £22m. Total project costs amounted to circa £15.5m (including the property acquisition).
The experienced developer client has injected circa £600,000 of their own cash, which amounts to just under 4% of costs.
This was a stretched senior debt-funded deal, with no profit share, and an interest rate of just under 9% per annum, plus fees.
The 18-month build programme will be delivered under a Joint Contracts Tribunal agreement with a strong, reputable contractor who was able to demonstrate a recently delivered comparable scheme in Liverpool.
We are now seeing a strong appetite from a variety of specialist lenders who are comfortable with higher gearing, particularly for schemes in strong city centre locations, from experienced developers.
Attributed to John Waddicker, Director of Positive Commercial Finance