£6.2m Development Finance for 22 Apartments in Bedminster, Bristol

The situation

The client was a Bristol developer with five completed schemes across the city and North Somerset, stepping up from a 12-unit project to a 22-apartment scheme in Bedminster, a part of the city we know well from our own doorstep, where the regeneration momentum around Bedminster Green has been pulling development south of the river for several years. The consented scheme was a mix of one and two bedroom apartments with a GDV appraised at £9.8 million, total project cost of £9.25 million including land at £2.9 million and build at £4.9 million, and the client needed £6.2 million of senior debt against his £3 million of equity.

Bristol is a strong city to build apartments in. It is also a city where the planning obligations do real damage to an appraisal that has not taken them seriously, and this file was priced around them rather than in spite of them.

Getting the planning obligations into the cost line

The consent carried an affordable-housing contribution, settled as a commuted sum through a viability review during the application, and a CIL liability calculated on the chargeable floorspace, and together the two added a little over £600,000 to the cost of the scheme. That is not a rounding error on a £9.25 million project. Every year we see at least one Bristol appraisal where the developer has treated the affordable contribution as a number to be negotiated away later and CIL as a footnote, and the lender's QS finds both within a week, at which point the equity requirement jumps and the credit team starts wondering what else is missing.

My advice to any developer building in Bristol is to get the CIL liability notice and the section 106 contribution into the appraisal as named line items before the lender's QS finds them for you, with the payment triggers mapped against the drawdown schedule, because CIL falls due on commencement unless an instalment agreement is in place and a six-figure payment landing in month one changes the shape of the facility. On this scheme we structured the day-one tranche to cover the land, the first CIL instalment and the commuted sum trigger, so the cash calls and the drawdowns lined up rather than colliding.

The rental fallback that carried the credit case

It was the rental numbers that got this deal priced properly, not the sales forecast. Bedminster's rental market is deep, pulled along by the city centre a walk away and years of undersupply, and we modelled a full dev-to-let exit as plan B: all 22 apartments retained, let at rents evidenced from three comparable blocks nearby, refinanced onto an investment facility at practical completion. The modelled rental income covered an investment facility large enough to repay the development lender in full, with headroom, and that single piece of analysis changed the conversation with every lender who saw the file.

What we have seen across Bristol apartment schemes is that a credible dev-to-let fallback takes the sharpest question off the table, which is what happens if the flats do not sell, and a lender who can see two independent routes to repayment prices the facility off the stronger of them. Around a third of the developers we work with now build that fallback into the appraisal from the start rather than treating rental as an admission of defeat, and on this scheme the client meant it, he was genuinely open to holding the block if the sales market softened.

Why the high street could not do it

The client's bank offered 55% of cost, capped at £5 million, with the affordable contribution and CIL treated as day-one equity spend and no interest in the rental fallback as a credit consideration. The £1.2 million gap would have meant raising mezzanine or a partner, either of which costs more than the pricing difference between the bank and the specialist market. We placed the case with a specialist development lender active in Bristol, whose credit team took the dev-to-let model seriously enough to test it against their own investment-lending criteria, and terms came back at 67% LTC on the full ask.

The structure

The facility completed at £6.2 million, with a day-one tranche of £3.4 million covering the land, the first CIL instalment and the commuted sum, and £2.8 million of build funding drawn monthly against works certified by the monitoring surveyor. Gearing sat at 67% LTC and 63% LTGDV, the money was priced in the high single digits annualised with an arrangement fee inside the usual 1 to 2 percent range, and a non-utilisation margin applied to undrawn build monies rather than full interest, which across a sixteen-month drawdown profile is a saving worth having.

The 22-month term wrapped a sixteen-month build with a six-month tail, and the exit was written into the facility both ways: open-market sales under agreed release pricing as plan A, with the lender pre-agreeing the shape of a whole-block refinance as plan B so that switching routes at practical completion would be a decision, not a renegotiation.

How it completed

First enquiry to credit-approved terms took fourteen working days including the lender's site visit. The valuation, the monitoring surveyor's appraisal and the rental evidence review ran concurrently over the following four weeks, and legals took another four, with the instalment agreement for CIL finalised in parallel so commencement would not trigger the full liability at once. Completion came just under ten weeks from first enquiry.

The build ran two weeks over programme, inside the tail. Sales opened off-plan at month twelve, fourteen apartments were sold or under offer by practical completion, and the remaining eight sold through the tail without the plan B ever being needed, which is exactly how a fallback should end its life, fully modelled and never used.