Finance for Property Developer

• Property: Freehold house in Regent’s Park
• Security value: £12.5M
• Loan amount: £8.15M
• LTV: Approximately 65%
• Bridging margin: 0.9% per month
• Equivalent annual rate: 10.8% per annum
• Arrangement fee: 2%
• Purpose: Refinance expired development finance and provide additional time for sale

Bridging finance can provide a short-term solution when a property development has been completed but the intended sale has not yet taken place. Enness was approached by a client who had acquired and refurbished a freehold house in Regent’s Park with the intention of selling the property following the completion of the works.

The property had a value of approximately £12.5M and had originally been funded using development finance. However, the property had not sold before the existing debt reached the end of its term. The client therefore required an alternative facility that would repay the existing borrowing and provide additional time to market and sell the property.

The underlying property provided substantial security for the proposed borrowing. Against a security value of £12.5M, the required bridging facility was £8.15M, representing an LTV of approximately 65%.

The key challenge was the timing of the refinance. With the existing development finance having expired and the property still awaiting sale, the client needed to move quickly while ensuring that the replacement facility was structured around a realistic sale-based exit strategy.

Enness assessed the property, existing borrowing and proposed exit before approaching suitable specialist bridging lenders. The objective was to identify a lender comfortable with the value and nature of the property, the level of borrowing and the fact that repayment would ultimately depend on the sale of the asset.

Following negotiations, Enness secured an £8.15M bridging facility against the £12.5M Regent’s Park property. The facility was arranged at a margin of 0.9% per month, equivalent to 10.8% per annum, with a 2% arrangement fee.

The facility provided the client with additional time to market the property and pursue the intended sale rather than being forced to dispose of the asset immediately because the original development finance had reached maturity.

The case demonstrates how property development bridging finance can be used after the development phase has been completed. Where a project has reached completion but the intended exit has been delayed, a short-term facility may provide additional time to sell or refinance, subject to lender criteria and a credible exit strategy.

Enness works with specialist lenders across the bridging and development finance markets and can assess funding requirements involving residential, commercial and development property. The appropriate structure will depend on the property, valuation, existing debt, LTV, proposed exit and the borrower’s wider circumstances.

Disclaimer:
This case study is for illustrative purposes only and does not constitute financial, legal, tax or investment advice. Finance is subject to status, underwriting, valuation, property suitability, due diligence and lender criteria. Terms, rates, LTVs, fees and availability may vary depending on individual circumstances. The rate and terms stated relate to the historical case and are not indicative of current or future pricing.

Risk Warning:
Property securing finance may be repossessed if repayments are not maintained. Bridging finance is short-term borrowing and can carry higher costs than longer-term finance. Where repayment depends on the sale of a property, delays in achieving a sale or changes in market conditions may increase borrowing costs and affect the proposed exit. Borrowers should ensure that a realistic and achievable exit strategy is in place before entering into short-term finance.