United Trust Bank has launched two new products aimed at simplifying the financial side of the development process for SME builders and developers.
The first, a ‘Build to Let’ finance solution is aimed at providing a one-stop funding service for developers looking to take advantage of growth in the Private Rented Sector (PRS) by building developments specifically to rent out rather than sell. For qualifying developments, the Build to Let facility will provide the funds to complete projects on the Bank’s usual terms and give an agreement in principle to provide an investment facility at the end of the build which will allow the developer to reduce their funding cost, recover some equity and move on to their next project without having to identify a new long term lender and incur more fees and costs.
UTB’s Sales Period solution has been designed to allow developers to refinance remaining stock arising from recently completed developments whilst they sell out the project. In most cases the Bank will be prepared to refinance existing debt and self-funded development costs and an element of equity release may also be available. If the funding is required to release capital for a further site purchase, UTB may be able to assist with the new scheme as well.
Noel Meredith, Executive Director of United Trust Bank, commented:
“The private rented sector is undeniably playing a vital role in the provision of the UK’s housing needs and the opportunities presented by the growth in the sector are particularly attractive to those who can acquire housing stock cost effectively and have the right corporate structures in place in which to hold and manage them. Developers on multi-unit projects sometimes decide to retain a small number of the units to create or add to their own buy to let portfolios and retaining one or two of the last units as deferred profit can be a cost effective option.”
“However, more recently we’ve seen some developers taking this approach to the next level and creating entire ‘build to let’ projects where they are literally building their own rental property portfolio at a much lower cost than acquiring existing housing stock. They not only get a property portfolio at wholesale prices, but they avoid all of the other associated costs one encounters when buying properties through traditional channels, including valuation and legal fees, and they have just one financial solution for the whole of that group of properties rather than a number of different loans or mortgages arranged if properties are acquired piecemeal.”
“Our Sales Period Funding solution will help developers in a variety of circumstances. Developers who wish to give themselves more time in which to achieve sales but have an expensive senior debt or a restrictive term may wish to refinance with us in order to reduce their ongoing costs and maximize their unit sales values. Our facility may also enable them to release capital in order to progress other projects. We will be happy to discuss refinancing opportunities with developers who have completed or near completed sites.”
“We will continue to provide innovative and competitive funding solutions to SME developers and we look forward to helping many customers, new and existing, take advantage of the opportunities presented by the housing sector.”
New Product Overview
Build to Let – Part 1 – Development
- Traditional development loan up to 60% of GDV
- 100% of construction costs, fees and interest and a contribution to site purchase.
- Terms of up to 24 months
- Agreement in principle that upon practical completion and achieving a level of ASTs the loan may convert to an investment loan.
Build to Let – Part 2 – Investment
- Investment loan up to 65% of value upon completion
- Terms of up to 5 years
- No fees on transfer to investment loan other than for new money and valuation
Sales Period Funding
- For experienced developers who are close to achieving build completion
- Loan amounts up to £10m
- Up to 70% of CTV
- Terms of 6 to 9 months usually. Occasionally up to 12 months.