A swift £21.5m facility saves developer from penalty interest

When a broker has a customer with a complex set of requirements which involves multi-million facilities, speed, flexibility and a cast-iron assurance to deliver to tight deadlines, they frequently turn to United Trust Bank’s Structured Finance Team for the solution.

In this recent example, Craig Booth of Sirius Finance was looking to refinance his client’s existing £19.2m development loan, which was due to expire and move to the lender’s punitive default rate. In addition, the client needed to borrow a further £1m to complete the development and allow £1.3m for interest, charges and other associated professional fees and disbursements. A total facility of circa £21.5m was therefore required.

The borrowers were new customers to United Trust Bank which meant that the Structured Finance team had to work quickly to assemble a full picture of the proposal and the client’s requirements.

The project comprised of the development of a large former warehouse in East London to provide 31 high quality apartments and over 25,000 sq ft of commercial office space. The developers had spent over two years and £250,000 of their own money working on the planning application for the substantial scheme and finally in 2015 the local council granted full detailed planning consent for the transformation of the original Victorian building and the demolition of the former warehouse to create a contemporary 6 storey building.

The development offers a variety of apartment styles from studio flats to 3-bedroomed penthouses priced from £500,000 to nearly £1.5m. The design and décor is particularly on trend for the area with exposed brickwork, exposed trunking, polished concrete and a high specification of kitchen and bathroom fittings. The project was close to practical completion and with the commercial space and freehold included, had a combined GDV of approximately £37m.

There were several exit options available and UTB’s team explored each one in detail. The most likely would be through the sale of the majority of the apartments, nine of which had already exchanged contracts with purchasers and a further four were reserved. The company would also retain the most attractive penthouse apartments and the commercial space for investment and these would be refinanced using a suitable longer-term facility when appropriate.

Although many lenders are wary of refinancing partially completed projects, UTB looks at each case on its merits and the team made several visits to the site and met key members of the professional team. Having seen that the work carried out to date was of a high quality, and although there were still works required to complete the build, the UTB Structured Finance team believed that the client could deliver the final product and subsequently agreed to provide the £21.5m required at a rate significantly below the existing facility.

Introducing broker, Craig Booth of Sirius Finance, commented:

“The client presented me with a complex case requiring an intelligent solution to include; redemption of the existing development lender, £2m of additional funds to complete the build, reduced rate upon practical completion and then again post sales with the client recouping their own capital too.

This is not something many (if any) lenders will understand or entertain. Gerard understood what we were trying to achieve almost immediately and assisted in presenting to credit, resulting in a flexible facility with incredibly competitive terms I doubt anyone else could have matched.

Both Gerard and Ajsela moved heaven and earth to get this case successfully completed… true brilliance!”

Developer Hugo Warner said:

“UTB worked hard to structure finance around our needs. We found that they had a positive approach to difficult circumstances, which was refreshingly welcome! The team committed to the deal and helped us get it over the line.”

Gerard Morgan Jackson, Head of Structured Finance at United Trust Bank commented:

“Most lenders will not consider part finished developments or residential schemes with units in excess of £1,000 per square foot, fortunately for our clients we are not most lenders. We believe in supporting the right clients on the right schemes regardless of current headlines. In this instance we tailored a facility to lift the client out of an expensive facility prior to incurring penalty interest. The facility also included a pre-agreed reduction in interest and equity release when an agreed level of sales were met.”