90% LTC Residential Development Finance
Competition from secondary lenders and the influx of Private Equity for Real Estate has started to put upward pressure on loan to cost percentages. In the space between retail banks and 100% funding, the loan to costs offered have steadily increased from 70% to 90% in the last 18 months.
A quick turnaround is possible with lenders active in this space, so heads of terms can be provided within a week and funding inside 4 weeks. Having a well prepared, thorough pack for the lender is crucial. Lenders arrangement fees on loans such as these range from a 1% to 2% arrangement fee. These are of course gross loan to cost percentages with interest roll-up, and the lenders fees to be deducted, so it works well for projects with a term of less than 36 months.
Geographically there are a number of lenders seeking both London and regional projects to fund, as they compete to get a return on funds they have committed internally but have not deployed to developers. Lenders are still seeking projects with strong fundamentals, so a competent management team with a project in a location with buyer demand remain important. Developers with their own contractor businesses can be more easily funded than last year. This allows for more control and improved profitability for the Directors.
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