£14.2m Development Finance for a 24-Unit New-Build Scheme in Guildford, Surrey

The situation

The client was an experienced regional developer with eleven completed schemes across Surrey and Hampshire, mostly in the 10 to 30 unit range. He had the site under a land bridge while planning completed, with detailed consent granted for 24 units, a mix of 16 houses and 8 apartments, on the edge of Guildford. GDV was appraised at £23 million, supported by comparable sales evidence from two schemes within a mile and a half.

Total project cost came in at £20.9 million. Land at £8.1 million, build at £11.2 million, with professional fees, contingency and finance costs making up the balance. The developer was contributing £6.7 million of equity, most of it already spent on the land and the planning process. He needed a £14.2 million senior facility to repay the land bridge and fund the build through to practical completion.

Then the planning department stopped answering emails.

The planning problem that squeezed the timetable

The consent carried pre-commencement conditions, the usual set covering drainage strategy, construction management plan and archaeology, and the discharge applications sat with the council for eleven weeks against a statutory expectation of eight. The land bridge had a hard redemption date, and the lender behind it had already granted one extension and made it clear a second would carry a rate hike and a fresh extension fee running to five figures.

Most land loans are written with deadlines that assume planning behaves itself. It never does. What we have seen across years of arranging development finance is that the discharge-of-conditions stage catches out more developers than the consent itself, because everyone plans for the planning decision and nobody plans for the twelve weeks of administration that follow it.

The practical consequence here was that the senior facility had to complete before conditions were formally discharged, which most development lenders will not do, because their facility assumes an immediate start on site.

Why the high street could not do it

The developer's own bank looked at the scheme and offered 55% LTC with full personal guarantees, capped at £9 million, subject to conditions being discharged before drawdown. That left a £5 million hole and did nothing about the land bridge deadline. The clearing banks price development risk cautiously and slowly, and on a scheme of this size the credit process alone would have taken longer than the extension the land lender was willing to give.

We took the case to the specialist development market instead. The lenders who write £10 million to £30 million senior facilities every week understand that a discharge delay on standard pre-commencement conditions is an administrative risk, and a manageable one, when the conditions are uncontentious and the consultant reports are already submitted. My role was to evidence exactly that, and I put together a pack with the planning consultant's tracker showing every condition, every submission date and the council's own written confirmation that no objections had been raised, so the lender's credit team could see the risk for what it was rather than what the file looked like from the outside.

The structure

The facility completed at £14.2 million, split as a day-one land tranche of £7.9 million to redeem the land bridge, with the remaining £6.3 million of build funding drawn monthly against certified works. Gearing sat at 62% LTGDV and 68% LTC, comfortable levels for a scheme with this depth of comparable evidence. The rate was priced off the day-one exposure with a non-utilisation margin on undrawn build monies, which matters more than most developers realise, because paying full interest on money still sitting with the lender is a cost that compounds over a 22-month term.

The lender accepted completion ahead of formal discharge, with a condition that no build drawdown would be released until the discharge notices were issued. In practice the notices landed three weeks after completion. The land bridge was repaid six days inside its deadline.

The 22-month term was deliberate. The build programme was 16 months, and we added six months of sales runway rather than the three the developer first asked for, because a compressed tail on a development facility forces discounted sales or a rushed refinance. Nine times out of ten the assumption developers get wrong is the sales period, not the build period.

Drawdowns and monitoring

The monitoring surveyor was appointed at credit approval, reviewed the appraisal, the build contract and the programme before completion, and then certified each monthly drawdown against work completed on site. Certified drawdowns typically release within five to seven working days of the site visit. The developer had not used monitored drawdowns at this scale before, and the adjustment is real: the paperwork is heavier, the site needs to be inspection-ready every month, and the QS and the monitoring surveyor need to be talking to each other rather than through the lender.

My advice to any developer moving up in scheme size is to get the build contract and the cost plan into a shape the monitoring surveyor will sign off before the facility completes, not after. It saves weeks.

Timeline

First enquiry to credit-approved terms took 15 working days, including the lender site visit. Valuation and monitoring surveyor reports ran concurrently over the following three weeks. Legals took a further four weeks, slowed slightly by the cross-referencing between the facility agreement and the outstanding conditions. Completion came just under nine weeks from first enquiry, six days ahead of the land bridge deadline.

Exit strategy

The exit was structured in two parts from the outset. Sixteen of the 24 units were to be sold on the open market during the facility term, with sale proceeds repaying the facility under agreed release pricing. The remaining eight units, the apartments, were to be retained by the developer as rental stock and refinanced onto a development exit facility at practical completion, releasing the senior lender in full.

We modelled the exit with the lender at three sales rates, and even at the slowest case, twelve sales inside the term, the retained-unit refinance covered the balance with margin to spare. Around a third of the developers we work with now retain part of each scheme rather than selling through, and structuring the senior facility with that split exit agreed on day one is far cleaner than renegotiating it at month eighteen.