Joint Venture Property Development Finance In North England

The Scenario

A regional house builder, who had a successful 15-year history of property building in the northwest of England, required a substantial amount of finance to fund their next development project.

The developer purchased a piece of land in Cheshire, where they intended to build a 13-house site, by securing a long-term revolving credit facility with a high street bank.

As a result of an unforeseeable policy change with the bank, the developer was denied a further extension of the facility to cover the cost of construction.

The Solution

In order to start construction and avoid any costly delays, a joint venture package was arranged for the developer.

The joint venture package was agreed on the following:

• The developer had to provide 5% of the total cost of the project - £169K

• The joint venture partner agreed to contribute the remaining 95% - £1.76M

• The joint venture partner would take the first charge over the site until repayment

• Total facility - £1.94M

• Term of finance – 15 months

This joint venture facility was calculated on a peak cash flow basis for the acquisition and construction of Phase 1 of the site in Cheshire.

The development finance provided allowed the developer to repay the facility from their existing bank and realise a land profit on day 1.

Financial Details

The full breakdown of the development appraisal can be found below:

The Outcome

The joint venture facility enabled the developer to finish the construction of the project and sell the entire 13-house site within the agreed term of finance.

On the back of this successful project, the developer and the joint venture partner have agreed to begin another development of 10 units just south of Manchester.

In a similar situation? Please call our team on 0117 959 5094 or complete our enquiry form.