Joint Venture Property Development Finance In North England
The Scenario
A regional house builder, who had a successful 15 year history of property building in the north west of England, required a substantial amount of finance to fund their next development project.
The developer purchased a piece of land in Cheshire, which they intended to build a 13 house site on, by securing a long term revolving credit facility with a high street bank.
As a result of an unforeseeable policy change with the bank, the developer was denied a further extension of the facility to cover the cost of construction.
The Solution
In order to start construction and avoid any costly delays, a joint venture package was arranged for the developer.
The joint venture package was agreed as the following:
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The developer had to provide 5% of the total cost of the project - £169K
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The joint venture partner agreed to contribute the remaining 95% - £1.76M
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The joint venture partner would take first charge over the site until repayment
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Total facility - £1.94M
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Term of finance – 15 months
This joint venture facility was calculated on a peak cash flow basis for the acquisition and construction of Phase 1 of the site in Cheshire.
The finance provided allowed the developer to repay the facility from their existing bank and realise a land profit on day 1.
Financial Details
The full breakdown of the development appraisal can be found below:
| Gross Development Value (GDV) | £4,146,753 |
| Land (Including Fees) | £ 809,250 |
| Warranted Build Cost | £2,228,737 |
| Marketing & Selling | £ 125,000 |
| Monitoring Fee | £ 15,000 |
| Finance Fees | £ 26,500 |
| Total Costs | £3,204,117 |
| Gross Development Profit | £ 942,636 |
| Gross Margin On GDV | 22.70% |
| Interest Charge | £ 201,359 |
| Development Net Profit | £ 741,267 |
| Number Of Units | 13 |
| Total Internal Square Foot | 18,552 |
| Sales £/Square Foot | £ 224 |
| Average Unit Sales Price | £ 318,981 |
| Warranted Build Cost £/Square Foot | £ 120 |
| Project Duration | 15 Months |
The Outcome
The joint venture facility enabled the developer to finish the construction of the project and sell the entire 13 house site within the agreed term of finance.
|
Developer's Profit Share (60%) |
£ 444,766 |
|
Return On Investment |
263% |
On the back of this successful project, the developer and the joint venture partner have agreed to begin another development of 10 units just south of Manchester.
Jack Spillane
Finance Broker
Bristol
0117 959 5094
Is your situation similar to this? I specialise in helping clients who need creative development finance solutions, and second-charge mortgages. Give me a call any time and we can set up a detailed discussion of the finance you need.
Mathew Phillips
Finance Broker
Bristol
0117 959 5094
Are you in a similar situation? I specialise in bridging finance at Clifton Private Finance - I will find you the best funding solution for your property transaction.
Alex Chambers
Senior Finance Broker
Bristol
0117 403 4324
Are you in a similar situation? I am a specialist in residential and investment property finance for UK and international clients at Clifton Private Finance. Please don't hesitate to get in touch for a no-cost discussion of the finance you need.
Luther Yeates
Senior Finance Broker
Bristol
0117 244 5561
Are you looking for a similar type of property finance? I have extensive experience finding residential and investment property finance for UK and international clients. Please get in touch and we can arrange a time that's convenient for you to discuss your situation.
Sam ONeill
Senior Finance Broker
Bristol
0117 959 5094
Is your situation similar? I am a bridging finance specialist at Clifton. I can find a quick, cost-effective solution for the funding you're looking for.
Robert Gibb
Senior Finance Broker
Bristol
0117 959 5094
Are you looking for mortgage or short-term finance for residential or buy-to-let property (including HMOs)? I have extensive experience in finding property finance solutions for UK and international clients, both as individuals and limited companies. Please give me a call and let me see what I can do for you.
Adam Arnott
Associate Director
Bristol
0117 205 0214
Is your situation similar to this? I have extensive experience of advising clients who need creative property finance solutions. Please get in touch and we can arrange a time that suits you for a detailed discussion of your requirements.