Joint Venture Property Development Finance In North England

Joint Venture Property Development Finance In North England

Area
Cheshire
Capital Raised
£1.94M

The Scenario

A regional house builder, who had a successful 15-year history of property building in the northwest of England, required a substantial amount of finance to fund their next development project.

The developer purchased a piece of land in Cheshire, where they intended to build a 13-house site, 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 on the following:

  • The developer had to provide 5% of the total cost of the project - £169K

  • The joint venture partner agreed to contribute the remaining 95% - £1.76M

  • The joint venture partner would take the first charge over the site until repayment

  • Total facility - £1.94M

  • 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 development 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.

In a similar situation? Please call our team on 0117 959 5094 or complete our enquiry form.

Max Mallinson

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Jack Spillane

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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. customDatabaseField-8455

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Alex Chambers

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