The Property Developer is the risk taker in developing out a property or properties, be they residential units or a commercial development. If a project runs smoothly and the "jigsaw" fits together, life for a developer can be blissful. However, in reality there are so many matters that can go wrong. It is essential for a developer to work with an experienced and knowledgeable broker who can offer a wide range of options and solutions.
Residential Development - The development of residential property can be very lucrative but it can involve risk. It is essential that an appropriate funding package is arranged for the specific project in mind. R & E Finance have a vast array of solutions for residential developers. Such solutions can involve senior debt, stretch senior debt, mezzanine and equity funding.
R & E Finance are able to arrange insurance to cover "abortive planning costs" and even pre-sales or sales guarantee facilities.
It is important that student accommodation is ready for the "new term". A developer may wish to build out for an institution on a forward fund basis, whereby the institution buys the land, pays for the build out and retains as a long-term investment. Alternatively, the institution may wish to avoid the development risk and prefer to "forward commit", whereby the institution will exchange contracts with a deposit and guarantee the purchase of the asset on "project completion". In such circumstances the developer would need senior debt to build out the project. However, the developer may wish to build out and retain the student accommodation as a long-term investment. Whatever the requirement, at R & E Finance we have the solutions.
Projects relating to affordable housing, social rent, shared ownership, it is possible to arrange the following:
• Forward funding, whereby the long-term investing institution buys the land, pays for the build out and retains the asset as a long-term investment.
• Forward commit whereby the institution agrees to purchase the project once the project has been completed.
• Senior debt funding to build out the project if the end investor wishes to invest only on a forward commit basis.
• Mezzanine funding which is often the essential "top up" finance to the main senior debt package.
For the operator or investor, the following funding is possible:
• Senior debt to fund a large portion of the project costs.
• Mezzanine finance to provide a "top up" finance facility secured behind the senior debt provider.
• Equity funding if there is little capital provided by the developer or operator.
• A stabilisation loan for 12 months to 36 months whilst the new home "stabilises" the ongoing occupancy levels and income before obtaining a long-term mortgage.
• A REIT to own the finished project to then rent back to the operator.
• A private equity house to build up a group of nursing or care homes with the operator before selling
Funding is available in the following circumstances:
• New build out of the ground.
• Refurbishment programme.
Project sizes from 60 units to 600 units can be funded on the following basis:
• Forward funded, whereby an institution buys the land, pays for the build out and retains the asset as a long-term investment.
• Forward commit, whereby an institution agrees to purchase the project on completion.
• Senior debt finance to build out.
• Mezzanine finance to "top up" the senior debt.
• Build to keep as a long-term investment for the developer.
This is an ever-growing market, especially where care facilities are on site. In such circumstances the following funding packages are available:
• Forward funding, whereby an institution will buy the land and pay for the ongoing build out.
• Forward commit, whereby an institution will commit to purchase the project on completion.
• Stretch senior debt to build out the project.
• Equity participation by an investor who helps to ensure the project is funded to completion.
Because of the demand for residential property, it is often appropriate for an office block investment or a warehouse to be converted into residential accommodation by way of "permitted development rights". In such circumstances the following facilities are available:
• Equity finance if third party funds are required to assist with planning permission fees.
• Senior debt to build out the project.
• Mezzanine finance to help to "top up" the senior debt.
• Pre-sale the new residential units.
For the developer or investor who wishes to build out bungalows or apartments for those who want to live independently but still need support, it is possible to arrange:
• Senior debt
• Forward funding
• Forward commit funding
• A long-term investor to own on project completion.
Because of the growth of online marketing and sales growth, this sector has become high profile. In turn the below facilities are available:
• Forward fund, if the warehouse etc is pre-let to a credible institution then an investment fund will buy the land and pay for the build out before owning on a long-term basis.
• If the warehouse etc is not pre-let or pre-sold, it is still possible to arrange funding on a speculative basis.
• Senior debt can be arranged to build out a speculative project.