Our customers originally identified a former institutional hostel building in a coastal town ripe for a planning change to residential. We initially provided funding to secure the site at 75% of value to enable planning permission to be sought.
After planning permission was successfully obtained for a scheme comprising ten apartments and three bungalows, we were approached to provide funding for 100% of the development costs. This level of funding represented a Loan to Value of 64%, based on the enhanced planning.
The Bank assessed the risk against the component parts of the development and, with strong demand for the bungalows from retirees, we were satisfied that early sales of these units would leave the residual exposure against the apartments at an acceptable and lower level.
Even although this was the customer's first development, the clients provided a mix of complementary skills including construction management expertise to satisfy the Bank. The construction has proceeded smoothly with the bungalows completed and the apartment block now close to completion. Our assessment of the sales market for bungalows has proved to be correct with one sale completed and the other two under offer. The apartments are due to be launched on to the market in Spring.
Loan to value: 64% pa