“Outside the Box Thinking” and Excellent Negotiation Skills
A developer owned a large site with planning permission in the South West of England.
The delivery of some 130 units was important for the local council, as a considerable part of the development was designated to provide much needed affordable and social housing.
The plot was initially acquired with a combination of angel investor funds and a bridge loan with an intention to complete the planning application.
Once the planning was granted, the developer made multiple attempts to secure sufficient finance to enable him to deliver the project. Unfortunately securing adequate finance proved very difficult due to:
1. Lack of adequate equity stake in place and
2. Lack of “proven track record” in delivery of similar scale projects
3. Lack of a main contractor with an adequate track record
Eventually the initial bridge loan term was nearing its end and the developer was faced with receivership. It was very clear at this point that the traditional senior debt plus mezzanine loan finance solution would not work in this case.
While the developer was faced by the potential bankruptcy this office was able to:
1. Secure a 100% funded solution with an institutional investor who saw the project as a long term investment opportunity for their pension fund,
2. Provided a guaranteed exit for the project i.e. the developer no longer needed to worry about finding buyers for his finished apartments nor whether the potential buyers were able to secure mortgages.
In addition to this, we
3. Found a reputable Main Contractor JV partner, who had a proven track record and experience to satisfy the investment criteria of the finance providers.
It is worth adding that this solution was put in place during the Covid-19 pandemic, which created unprecedented problems in the property development industry.
The solution we were able to put together is a very much a win-win outcome for all stakeholders:
1. The developer delivers a project with profit rather than becoming a bankrupt.
2. The original angel investors will get their initial investment back (which they would have lost should the site gone into receivership).
3. The local authority will have the much needed housing stock for the local community.
4. The funder has a long term cash flowing asset producing healthy yields.
This is an example of how Catherine Spode and Associates is proud to provide bespoke finance solutions that turn development projects from adversity to success.