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 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: 

  • 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 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 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.  

James Palmer

Senior Associate

London

0203 900 4322

Have a similar situation? I specialize in development and commercial finance and can provide creative solutions for your property funding requirements.

Sam ONeill

Finance Broker

Bristol

0117 959 5094

Have a similar situation? I specialize in bridging finance and can provide creative solutions for your property funding requirements.

Sam Norris

Senior Finance Broker

London

0203 900 4322

Have a similar situation? I am a specialist in residential and investment property finance for UK and international clients. I look forward to hearing from you.

Robert Gibb

Senior Finance Broker

Bristol

0117 959 5094

Require mortgage or short term finance for residential or buy to let property (including HMOs and limited companies)? I have extensive experience on providing property finance solutions for UK and International clients.

Adam Arnott

Senior Associate

Bristol

0117 959 5094

Are you in a similar situation? I have extensive experience in advising clients on providing creative property finance solutions. I look forward to hearing from you.

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