Deposit release bonds (DRB) provide developers with a low-interest source of working capital for their project.
The bond allows a developer to use the funds in escrow for the project’s remaining construction costs, as opposed to obtaining additional capital from traditional funding lines.
“As we see the hardening of the insurance market, which has already resulted in the withdrawal of loss of deposit cover from a number of leading insurers, we believe the introduction of this surety project will be very timely for developers,” commented Giles Fallan, managing director at the London Belgravia Group (pictured above).
London Belgravia has started offering DRB up to £15m (which could be used on a project with a GDV of £150m, at an average of 10% deposit per unit).
The total cost of the bond can vary from 6-12%.
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The brokerage believes that the product can be more attractive if a developer’s senior debt is relatively expensive or they are near the maximum limit of the LTGDV, and is said to be more cost effective than mezzanine funding.
It has also released a DRB calculator that provides users with comparative analysis, as well as estimated saving projections versus traditional funding lines.
“Deposit release bonds fill an important gap in the market,” said Giles.
For over five years, the brokerage has been offering insurance and risk solutions to meet the changing needs of businesses and property professionals.
As a result, it has benefited from knowledge and insight into its clients’ needs and motivations.
“As we selectively expand our offering to solve new challenges, we do so with the full support of our client book,” Giles added.
The group recently entered the renewable insurance market and, in September, launched new specialist finance brokerage, London Belgravia Specialist Finance.
London Belgravia’s core areas of expertise include latent defects insurance, performance bonds, insurance-backed guarantees, short-term finance, property finance, and construction all risk.
This extends across all aspects of prime and super-prime residential projects, commercial developments, conversions, and refurbishment projects.