The facility, ‘development plus’ — which is LDS’ first formal collaboration with a lender — is aimed at SME developers looking for increased leverage and a reduced equity injection.
It enables borrowers to finance more schemes by increasing their LTGDV by over 75% and typically reducing their cash contribution by up to 77%.
LDS guarantees to acquire any unsold units on a site, removing all speculative risk and allowing lenders to up their leverage.
The company can also release its 10% cash deposit to developers, unsecured and at zero coupon.
The new product provides 95% LTC and, with the additional leverage and LDS deposit release, it allows developers to increase their development capacity.
“We believe the development plus facility is the perfect solution for the current market conditions,” commented Roxana Mohammadian-Molina, chief strategy officer at Blend Network (pictured above, left).
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“With advisers currently cautioning a potential softening in purchase activity due to slowing government support for first-time buyers, this product removes concerns around the exit for borrowers and lenders alike.”
Mark Roberts, relationship director at LDS (right), added: “We are in constant contact with lenders and brokers, so the progression to joint products is a natural next step.
“The country is falling short on housing supply, yet there are some very capable developers and willing lenders out there.
“The disconnect is often linked to finance and equity; development plus goes a long way towards removing this and opening up opportunity for SME housebuilders.”
Yann Murciano, chief executive at Blend Network, said: “This new breed of financial product is a very compelling proposition for developers, brokers and lenders alike that allows each party to maximise opportunity and profit.
“By guaranteeing the developer’s exit, it allows us as lenders to push our gearing and borrowers to reduce their upfront cash contribution and increase returns on cash invested.”
Mark Hawthorn, CEO at LDS, stated: “The sales guarantee completely transforms the risk profile for lenders, so it’s natural that we start to create joint products.
“This makes the whole finance process quicker and easier for lenders, brokers and developers, allowing for increased numbers of new homes to be brought forward.”
LDS has issued almost £1.3bn of guarantees so far this year, which Mark described as “the tip of the iceberg”.
Borrowers and brokers interested in this product can email [email protected].
In the latest issue of the Bridging & Commercial Magazine, LDS exclusively revealed it was looking to come out with broader criteria, exclusive new products, and its own housing association.
Picture by Mark Waugh at Windmill Green, Manchester