Equity Funding Platform: 100% equity facility for developers.
September 28, 2021
Equity Funding Platform: 100% equity facility for developers.
Fully Funded Residential Development: Guidelines for Developers
Location
o UK wide - excluding inner London(ie not within North and South Circulars).
o Product appropriate attractive locations.
o Demonstrable demand
Property Type
o 5-20 units typically over a single phase;
o Ideally 3-5 bed family housing albeit a small number of apartments could be considered;
o May consider PD for the right scheme;
o Traditional Build;
o Price point up to circa £1m in unit values,£800per sq ft max subject to local values
o Must have planning
Developer Profile
o Experienced developer;(young teams with relevant professional background considered)
o Existing and demonstrable track record;
o Strong preference for developer procuring via sub-contract management
o Will consider 3rd party contractors on JCT basis;
o Will recognise land gain where the developer can show they have added value. (and willing to consider a release of a proportion of such equity on Day 1)
o 100% equity for those with suitable track records etc
o We seek long term relationships, not one off transactions
o Due diligence process undertaken to approve developer as partner.(thereafter repeat scheme decisions based on project)
o Willingness to engage in sustainability objectives.
Project Financial Profile
o Senior interest normally rolled up
o Typically requires min 25% ROC.
o Senior debt arranged (0.5% fee to project). Will accept developers lender subject to suitability.
o Term 18 to 30 months. Typically 12 month build then sales period determined by volume
JV Terms
o £0.75m to £3m equity .Will consider and will go materially larger for mixed use schemes
o 7% priority profit-share on equity (as look -back IRR),then
o Profit shares typically between 40/60 to 60/40 subject to scheme returns
o May require min’ fixed multiple .Will negotiate alternatives.
o Typically 100% equity to approved development partner.
Senior Lending
o Typically 60% GDV on senior, max 65%
o Established reputable lenders
o No mezzanine or split capital stacks.
Structure
o JV structure .Vehicle will be a fund SPV (UK LLP);Normally fund and Developer as partners
o Developer contracted through an LLP Agreement and DMA which covers profit sharing arrangements.
o Developer responsible for cost-overruns
o Developer provides cost-overrun guarantee to senior debt provider
o Fund normally provides interest cover guarantee to debt provider.
o Full step-in rights for breaches.
o Materiality clauses for variation to spec’
o Key man cover required if appropriate
o Professional Industry Insurance required
o Straightforward legal documentation
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