To be successful all developers need to be somewhat flexible in how they operate.
From the pandemic and Brexit to the war in Ukraine, there has been no shortage of macro-economic factors which have led to delays for projects, making it tougher to obtain the materials or labour needed.
Those delays aren’t just a source of general frustration, they can have a big impact on the developer’s eventual plans too.
The changing nature of the UK housing market may mean the delay forces the developer to consider a different price point when selling the units, or perhaps must opt to hold onto some of them as rental properties until the market improves.
Plan B for financing
The impact of these delays — and of course any correction made by developers to maximise the returns from the units they have been working on — will sometimes mean they can no longer clear the initial development finance according to the original timetable.
It may be that while the work has been completed, the units have not all been sold yet, meaning the funds are not available to clear the balance.
Or it could mean the work is still ongoing and additional time is needed before the units can be sold and the loan paid off.
This is going to be a testing time for any developer, which is why it’s so useful for advisers to be able to highlight the option of a development exit loan.
Understanding developers
If a development exit product is really going to deliver, then it’s crucial the lender understands what’s important for the borrower.
There is no point in offering such a product if it fails to address the needs of a developer who requires a little helping hand in getting their project over the finishing line.
A good example here is the way the funds which come in from the sale of units are handled.
Some lenders insist that the entirety of net sale proceeds go directly towards clearing the outstanding debt on the development exit loan, but the reality is it doesn’t always support the developer.
Against the clock
Developers looking for this sort of funding are facing a pressing deadline and keen to avoid the fees and additional costs which would come from having to extend the original development finance facility.
It’s vital for lenders to be able to meet those deadlines, to be agile enough to assess the case and provide the funds swiftly, while still operating in a responsible manner.
The desire to help clients in a speedier manner was behind the launch of our fast-track process at Tuscan a year ago, and we have had plenty of cases where it has made an enormous difference to borrowers looking for a development exit loan.
The Fast Track process means utilising AVMs and desktop valuations where suitable, ensuring not only that we can move more swiftly but also save money on legal fees for the client.
Getting over the line
The reality is that many of the root causes for the delays which have hampered developments in recent years have not gone away.
Advisers will still find some of their developer clients heading quickly towards an end date for their project’s financing, without the project being completed.
Working with lenders who understand this market and have built the products and processes to support developers in this position is therefore crucial for any adviser active in this sector.
By working together, we can help developers get their projects over the line and deliver the housing so badly needed right across the country.
Read the full article on Bridging & Commercial.
For more information or to get in touch with the team, please contact us:
Call Us: 020 7846 9030
Email info@tuscancapital.co.uk
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A range of case studies demonstrating examples of previously completed loans can be found here.