Flexible funding for a farm redevelopment

United Trust Bank was approached by one of our long established brokers to assist with a new customer who had exchanged contracts with a land owner on an option to purchase the freehold interest in a farm in Hertfordshire and develop it on a joint venture basis.

The option agreement was divided into a number phases and our clients required development finance to undertake the first two phases which was the redevelopment of an old stable and barns into high quality residential units. The land value being deferred until the project was complete and sold.

As part of the option agreement, our client was also purchasing an adjacent farm house from the same vendor for which they also required funding and which was subsequently let on an assured shorthold tenancy.

By cross collateralising the two loans the Bank was able to lend 100% of the purchase price of the farm house and also 100% of the build budget for phases 1 & 2 of the development.

Two months into the development our clients were approached by a potential purchaser looking to buy one of the units via an initial cash payment followed by a build contract agreement by which the purchaser funds the build.

This benefited both the customer and the Bank and we restructured the facilities to allow the client to use the initial sales proceeds to reduce their debt and also reduce the build budget to allow them to use the funds being provided under the build contract.

The development is now progressing well with the Bank continuing to fund part of the build and our quantity surveyor monitoring the progress of the project as a whole.

Development Loan: £2,810,000 GDV: £6,000,000  
Farm House Loan: £1,220,000 Value: £1,150,000  
Combination: £4,030,000 £7,150,000 LTV: 56%