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How to secure funding for development in 2021

In this extraordinary year, with many challenges facing us, there still remains a strong demand for growth within the housebuilding sector, but what do you have to do as a borrower to be in the best position to secure funding for your development? 

  1. Provide a brief summary of the proposed development

Regarding the development itself, we would expect the borrower’s experience to filter though into the form and content of what a lender requires to see in order to undertake a quick review of any scheme to gauge appetite.

The site and geographical area itself are of key consideration. Have you studied the demand in the area for the scheme you are proposing? Whether that is demand for housing – and for what size of units – and for any commercial elements of the scheme.

What are the costs of acquiring the site? What are the costs of development? Do you have a contractor in place? At what price will you sell or rent the units? And what is the projected end value of the scheme?

2. Do you have a track record demonstrating your ability to deliver similar projects to the proposed scheme?

At Pluto, we will look for housebuilders with a proven track record, demonstrating their ability to deliver schemes of similar nature. Ideally you should provide details of least two or three schemes that have already been built and sold.

3. Provide a brief summary detailing previous schemes, their costs and profits and if they were sold or retained

Numbers are important here. Demonstrating the success of previous schemes will put you in good stead for providing the finance you need at each stage of development.

At Pluto we will look to fund site acquisitions, development costs and development exit so that once your development is complete, you can start the next project with ease. This year, post lockdown, we completed a number of development exits facilities including: a £13 million Wembley development exit facility; a £3.4 million exit loan in Hertfordshire, and; a £9.7 million acquisition funding in Milton Keynes and a £35 million facility to fund the site acquisition and development of a residential-led, mixed-use scheme in Chiswick.

In additional to the development exit loans mentioned above, in Essex we provided the borrower with a £10 million development exit bridge and equity release. Towards the end of 2020 we have seen an increase in these types of queries from developers looking at gearing up completed schemes through development exit bridge loans to release equity to acquire new sites.

This year we also completed the £34 million funding of 700 purpose-built student accommodations units in Swansea to enable the developer to complete the scheme. All of these demonstrated solid fundamentals including track record, demand and the ability to successfully complete and sell or let the developed space.

We will also look to provide Bridge loan facilities. This year the Pluto team provided Bridge loans including a total of £16 million for two sites in Ashford, Kent and Cockfoster in North London. The Ashford loan enabled the borrower to fund a deferred payment for site acquisition and provide additional funding for enabling works on the site. And in Cockfoster, Pluto funded the purchase of a semi-vacant office building, allowing time for the borrower to obtain vacant possession and enhanced planning consent before proceeding with the development finance.

4. Provide evidence that you and your team are best resourced to deliver your proposed scheme

Due to land trading at a premium, cost of materials on the rise and a shortage of qualified labour, developers will have to ensure efficiency and deliverability is a key consideration. At Pluto, we are looking for evidence that our borrowers are not under resourced to deliver the scheme and that taking on another scheme will not stretch them too far.

To that end, details of the method of procurement and the proposed professional team project appraisal should be included in your project summary.

5. Meet us on site

Last, but most certainly not least, we always want to meet our borrowers and preferably on site. This way we can really picture the proposed development as well as surveying the area to make sure the reality backs up the figures and detail proposed.

Despite this extraordinary year we have been through and the many challenges that Covid-19 has presented; at Pluto Finance we have remained very much open for business. With backing from some of the world’s largest institutional investors and a highly experienced team, we have the ability to evaluate each development on its merits and understand that no two projects are the same. Our loans are tailor-made for each project.

 

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